Bonnett's Energy Services Trust Announces 2007 Annual Results



    CALGARY, March 6 /CNW/ - The Trust's 2007 results were affected by
significantly lower industry utilization levels than 2006. Higher than usual
rainy weather conditions in the second and third quarters hampered the ability
to move equipment and contributed to lower activity levels. The average active
drilling rig count in Canada was approximately 339 in 2007 versus 504 in 2006
and 508 for the same period in 2005. Compounding the already low level of
drilling activity was the Alberta government's decision in the fourth quarter
to increase royalty rates on natural gas production starting in 2009. The
effect of this change to royalty rates is expected to significantly increase
the cost of producing natural gas for most producers in Alberta. The Trust's
customer base reduced activity levels in the fourth quarter of 2007 while they
were analyzing the effects of these changes as well as engaging in lobbying
efforts. Activity levels in the fourth quarter are normally strong when
producers are typically getting ready for their winter projects.
    The difficult 2007 year and the poor outlook for the first half of 2008
made it necessary for the Trust to take steps to strengthen its balance sheet
and return its focus to its core businesses. On November 21, 2007, the Trust
sold the assets of its fracturing stimulation services division for an
aggregate purchase price of $27.6 million. The asset sale agreement was
completed through two separate agreements. The first agreement was closed in
December 2007 while the second agreement closed in January 2008. The proceeds
from these agreements were utilized to reduce the Trust's existing banking
facilities. In the first quarter of 2008, the Trust also sold its aircraft for
approximately $2.8 million and a few other redundant assets, with the net
proceeds being applied to the existing banking facilities. By the end of
January, 2008, the Trust reduced its outstanding banking facilities by
approximately $31.1 million. Net debt (debt net of working capital) was
approximately $39 million at the end of January 2008.
    The Trust generated revenue from continuing operations of $80.7 million
in 2007 compared to $113.6 million for 2006. EBITDAC(1) from continuing
operations declined by 65% to $11.1 million in 2007 compared to $31.3 million
in 2006. Net income from continuing operations declined by 380% in 2007 to a
loss of $55.9 million ($-4.81 per diluted unit) compared to $16.6 million in
2006 ($1.42 per diluted unit).
    This significant decline in net earnings is primarily a result of a write
down of $52.5 million in the carrying value of goodwill and intangibles. The
value of the goodwill and intangibles on the Trust's balance sheet has been
negatively affected by the Federal government's decision to change the
taxation rules as they apply to income trusts, a general slowdown in natural
gas drilling activity and the uncertainty created by the Alberta government's
decision to change the royalty structure on natural gas production.
    The Trust generated revenue from continuing operations of $18.1 million
in the fourth quarter of 2007 compared to $28.2 million for the fourth quarter
of 2006. EBITDAC(1) from continuing operations declined by 63% to $1.8 million
in the fourth quarter of 2007 compared to $4.9 million in the same period of
2006. Net income from continuing operations for this period declined by 1135%
in 2007 to a loss of $30.5 million ($-2.59 per diluted unit) compared to
$2.9 million in 2006 ($0.25 per diluted unit).
    On January 31, 2008, the Trust negotiated with its banking syndicate to
extend the maturity dates on the facilities until April 30, 2008. During this
period, the Trust intends to negotiate longer term facilities.
    With the sale of the fracturing assets, the Trust has turned its focus to
its core services. Throughout a slower 2007, the core wireline services
business showed positive results. The remaining expansion division, Fishing
and Rentals, began contributing positively by the end of 2007 and has a
promising outlook for 2008.
    Significant recurring monthly costs have been eliminated with the sale of
the fracturing division. Net losses before income taxes from these
discontinued operations were approximately $7.2 million for 2007 and
$3.3 million in 2006. The Trust has also been aggressive with its cost
reduction program to help offset the effects of the reduced activity levels.
The Trust will continue to diligently monitor industry activity levels and
make any further adjustments as required. In addition, the Trust's capital
budget has been scaled back to include only maintenance capital. No additional
expansion capital is anticipated until activity levels improve.

    
    Highlights
    ----------

    -------------------------------------------------------------------------
    December 31                                 2007        2006        2005
    -------------------------------------------------------------------------
    ($000's except per unit amounts and                             101 Days
    jobs completed)                                   Year Ended       Ended
    -------------------------------------------------------------------------
    Revenue from continuing operations        80,734     113,614      24,837
    EBITDAC from continuing
     operations(1)                            11,054      31,278       9,139
    Funds flow from continuing
     operations(2)                             6,197      30,121       8,517
    Funds flow from continuing
     operations per unit
      Per Unit - Basic                          0.53        2.67        0.94
      Per Unit - Fully diluted                  0.52        2.59        0.93
    Net income ( loss ) from continuing
     operations                              (55,947)     19,979       5,670
    Net income (loss) from discontinued
     operations                               (6,253)     (3,421)       (270)
    Net income (loss)                        (62,200)     16,558       5,400
    Impairment loss on goodwill and
     intangibles(4)                           52,478           -           -
    Net income ( loss ) per unit from
     continuing operations
      Per Unit - Basic                         (4.81)       1.77        0.62
      Per Unit - Fully diluted                 (4.81)       1.72        0.62
    Net income ( loss ) per unit from
     discontinued operations
      Per Unit - Basic                         (0.54)      (0.30)      (0.03)
      Per Unit - Fully diluted                 (0.54)      (0.30)      (0.03)
    Net income ( loss ) per unit
      Per Unit - Basic                         (5.35)       1.47        0.59
      Per Unit - Fully diluted                 (5.35)       1.42        0.59
    Distribution to unitholders               10,409      19,679       2,999
      Distribution per unit - basic             0.90        1.74        0.33
    Weighted average units
      Basic                               11,630,182  11,279,734   9,078,226
      Diluted                             11,630,182  11,629,722   9,113,910
    Total assets                             128,422     211,405     133,998
    Total long-term liabilities                    -      59,637         420
    Jobs completed from continuing
     operations(3)                            15,058      21,449      86,300
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Notes:
    (1) Earnings before interest, taxes, depreciation, amortization and unit
        based compensation and certain other items ("EBITDAC") is not a
        recognized measure under Canadian Generally Accepted Accounting
        Principles (GAAP). Management believes that in addition to net
        earnings, EBITDAC is a useful supplemental measure as it provides an
        indication of the results generated by the Trust's principal business
        activities prior to consideration of how those activities are
        financed or how the results are taxed. These measures are identified
        and presented, where appropriate, together with reconciliations to
        the equivalent GAAP measure. However, they should not be used as an
        alternative to GAAP, because they may not be consistent with
        calculations of other companies or trusts.
    (2) Funds flow or funds flow from operations, refers to cash flow from
        operations before changes in non-cash working capital. The Trust
        views cash flow from operating activities before changes in non-cash
        working capital balances, hereafter referred to as Funds Flow, as a
        measure of liquidity, and believes that Funds Flow is a metric used
        by many investors to assess the financial performance of the Trust.
        As the Trust may distribute a portion of its cash on an ongoing
        basis, the Trust believes that Funds Flow is an appropriate
        consideration in determining funds available for distribution to
        unitholders. Although changes in non-cash working capital balances
        will impact cash available to finance distributions, these changes
        will be a source of cash in one period and a use of cash in another
        depending on changes in the level of activity in a particular period
        due to seasonality and other factors. Absent a sustained period of
        growth in the Trust's business, changes in non-cash working capital
        will generally not be a use of cash by the Trust over a longer period
        of time, although that may be the case from one quarter to the next.
        Given that these changes are not predictable and tend to even out
        over time, management does not believe it is appropriate to include
        such changes in determining cash flow from operating activities being
        a measure used to indicate capacity of the Trust to generate cash
        flow for paying distributions in the future. Any use of cash from an
        increase in working capital in a particular period will be financed
        by the Trust's credit facilities and repaid when non cash working
        capital decreases and cash is generated. See the heading "Funds flow
        from Operations" for a reconciliation to the equivalent GAAP measure.
        Funds flow should not be used as an alternative to GAAP, because it
        may not be consistent with calculations of other companies or trusts.
    (3) The Trust's method of calculating jobs completed may differ from
        other companies or trusts and may not be comparable to measures used
        by other companies or trusts. Jobs completed are the total of all
        jobs completed during the period.
    (4) Impairment tests were performed on intangible assets and goodwill at
        December 31, 2007. The results of the tests indicated that the
        carrying amount of goodwill and intangibles exceeded fair value. The
        conditions which precipitated the impairment of goodwill and
        intangibles were impacted by external factors such as commodity
        pricing, new government regulations regarding income trusts and
        royalties, and currency exchange rates which in turn impacted
        industry activity levels and equipment utilization rates. Cost
        pressures combined with the increased value of the Canadian dollar
        have adversely impacted operating margins and future expectations of
        activity levels in the oil and gas service industry. These conditions
        have resulted in the enterprise value of the Trust being eroded,
        which is reflected in the value of the Trust at December 31, 2007.
        Accordingly, $52.5 million was recorded as goodwill and intangibles
        impairment in the year and the carrying value of goodwill was reduced
        from $ 46.7 million to nil and intangibles from $5.8 million to nil.
    


    Results From Operations
    -----------------------
    For the year ended December 31, 2007, the Trust generated revenues from
continuing operations of $80.7 million, a decrease of $32.9 million from
revenues generated in 2006. The Testing Services division, with a decrease of
56%, showed the largest decrease in revenue generated due to decreased
industry activity levels. The Wireline Services division showed a year over
year decrease in annual revenue of 29% as a result of wet weather conditions
and reduced industry activity levels. This 29% reduction in revenue compares
to the 24% drilling rig utilization decrease. Offsetting the decline in
revenues for the Testing Services and Wireline Services divisions was the
Fishing and Rentals division. The Fishing and Rentals division increased
revenue 32% due to the expansion of the fishing and pipe recovery operations
to additional locations.
    Utilization rates in 2007 for the Wireline Services division were 53%
lower than 2006. Fewer jobs were performed in 2007; and there was a decrease
in average pricing of 7%. With the reduced industry utilization, there has
been a significant amount of bid work completed at reduced pricing.
    Utilization rates for the Testing Services division in 2007 were 72%
lower than for the same period in 2006. Average job revenue was 9% higher in
2007 despite the lower utilization levels. The Testing Services division was
impacted significantly by the decrease in new well completion activity and
increased competition due to the migration of equipment from central Alberta
to the Grande Prairie region. Testing services tend to be very portable,
allowing competitors to move equipment very easily without the need for
support infrastructure.
    The Well Stimulation - Pumping division increased the average price per
job in 2007 versus 2006 due to new equipment received which became operational
during the year. This equipment improved the ability for the Well Stimulation
- Pumping division to perform larger, higher priced jobs. This division also
moved from Red Deer to Grande Prairie, a deeper gas area. The Well Stimulation
- pumping division completed 530 jobs during 2007 compared to 705 in 2006.
    The Trust completed its first fracturing stimulation treatment in January
2007. Due to reduced market activity, the Trust decided to turn its focus to
its core divisions, and as such, sold the assets of the Fracturing division in
the last quarter of 2007.
    The Fishing and Rentals division performed 21% more jobs at an average 9%
higher rate in 2007 versus 2006. The increase in the number of jobs performed
was due to the expansion of this division to three additional locations in
2007. Components of this division have not been in operation for longer than a
year and are still considered to be in the start-up phase. During the last
quarter of 2007, the Trust began to see consistent contributions from this
start-up division.
    Overall, the Trust had significantly lower utilization levels during 2007
compared with 2006. Concerns over natural gas storage levels and pricing in
the last half of 2006 and 2007 had the effect of reducing drilling and new
well completion budgets.
    Gross margin from continuing operations as a percentage of revenue of 21%
for 2007 was 56% lower than 2006. This decrease was primarily as a result of
the lower levels of drilling and completion activities and the start-up costs
of the Fishing and Rentals division.
    Operating costs from continuing operations decreased from 2006 by
$11.8 million. This decrease is a result of decreased activity levels and the
cost reduction program instituted by the Trust. Operating costs for 2007 were
79% of revenues versus 67% for the same period in 2006. Significant changes
that have occurred since 2006 are discussed below.
    Wages and benefits increased as a percentage of revenue by 7% from 2006
due to lower revenues generated by the start-up Fishing and Rentals division,
as well as a few newer wireline locations. Management anticipates one to two
years of operations in some business lines before revenue streams become
normalized. To expand to these areas and retain qualified staff, wages and
benefits were paid at going rates while revenues were lagging. The majority of
the Trust's employees are compensated by a fixed component wage combined with
a variable component. As utilization decreases, the fixed component becomes
larger as a percentage of revenue.
    The increase in wages and benefits in 2007 was partially limited due to
the cost reduction plans announced in March and August. Staffing levels in
April were reduced by over 15% from levels in March. The cost reduction plan
completed during the second quarter of 2007 is expected to result in
approximately $7.0 million in annualized costs savings. Additional wage
reductions were announced in August 2007 with estimated annualized savings of
approximately $2.0 million. The Trust will continue to diligently monitor the
industry activity levels and make any further adjustments as required.
    Purchases for resale represented 12% of revenue for 2007 versus 9% for
2006. This increase was primarily the result of lower pricing for the Trust's
services and increased pricing from the Trust's vendors.
    Repairs and maintenance decreased by 46% in 2007 over the same period in
2006. This decrease was primarily due to the reduced activity levels, minimal
internal expansion and to the cost reduction plan announced in March and
August.
    Fuel expense increased to 4% of revenue. The increase was a result of
higher fuel costs from the same period in 2006.
    Rent increased in 2007 over the same period of 2006 due to the expansion
of the Wireline Services and Fishing and Rentals divisions. Additional shops
were rented in 2007 over 2006.
    Other expenses increased to 5% of revenue. The Trust expanded into new
locations which resulted in increased supplies and property taxes. Included in
other expenses are advertising, bad debts, supplies, property taxes and
freight. With the slow down in industry utilization the Trust has seen an
increase in the number of bad debts.

    
    -------------------------------------------------------------------------
    Year Ended                      % of              % of                 %
    December 31            2007  Revenue     2006  Revenue   Change   Change
    -------------------------------------------------------------------------
    ($000's except jobs
    completed, and
    utilization rates)
    -------------------------------------------------------------------------
    Revenue from
     continuing
     operations
      Wireline Services  58,889       73   82,731       73  (23,842)     (29)
      Testing Services    8,626       11   19,644       17  (11,018)     (56)
      Well Stimulation
       - Pumping          4,050        5    4,316        4     (266)      (6)
      Fishing and
       Rentals            9,169       11    6,923        6    2,246       32
    -------------------------------------------------------------------------
                         80,734      100  113,614      100  (32,880)     (29)
    Operating costs
     from continuing
     operations          64,087       79   75,842       67  (11,755)     (15)
    -------------------------------------------------------------------------
    Gross margin from
     continuing
     operations          16,647       21   37,772       33  (21,125)     (56)
    -------------------------------------------------------------------------
    Revenue per job
     completed from
     continuing operations
      Wireline Services    5.67        -     6.11        -    (0.44)      (7)
      Testing Services     3.76        -     3.46        -     0.30        9
      Well Stimulation
       - Pumping           7.64        -     6.12        -     1.52       25
      Fishing and Rentals  4.94        -     4.53        -     0.42        9
    -------------------------------------------------------------------------
    Weighted average       5.36        -     5.30        -     0.06        1
    -------------------------------------------------------------------------
    Jobs completed
     (number) from
     continuing
     operations(1)
      Wireline Services  10,380        -   13,538        -   (3,158)     (23)
      Testing Services    2,293        -    5,677        -   (3,384)     (60)
      Well Stimulation
       - Pumping            530        -      705        -     (175)     (25)
      Fishing and
       Rentals            1,855        -    1,529        -      326       21
    -------------------------------------------------------------------------
                         15,058        -   21,449        -   (6,391)     (30)
    -------------------------------------------------------------------------
    Utilization (%)(2)
      Wireline Services      40        -       85        -      (45)     (53)
      Testing Services       21        -       76        -      (55)     (72)
      Well Stimulation
       - Pumping             19        -       39        -      (20)     (52)
      Well Stimulation
       - Fracturing          19        -        -        -       19      100
    -------------------------------------------------------------------------

    Revenue from
     discontinued
     operations           6,448      100       68      100    6,380    9,382
    Operating costs from
     discontinued
     operations           9,125      142    2,512    3,694    6,613      263
    -------------------------------------------------------------------------
    Gross margin from
     discontinued
     operations          (2,677)     (42)  (2,444)  (3,594)    (233)      10
    -------------------------------------------------------------------------
    Revenue per job
     completed from
     discontinued
     operations              63        -        -        -       63      100
    Jobs completed
     (number) from
     discontinued
     operations(1)          102        -        -        -      102      100
    -------------------------------------------------------------------------
    Notes:
    (1) Refer to note (3) under the heading "Highlights".
    (2) Utilization statistics are not maintained for the Fishing and Rentals
        division.

    Capital Expenditures
    --------------------

    During 2007, the Trust added the following:

    -   The Wireline Services division added two swabbing rigs and four truck
        mounted wireline units and associated tools and equipment.
    -   The Testing Services division added miscellaneous equipment to
        support existing operations.
    -   The Well Stimulation - Pumping division took delivery of one nitrogen
        and two acid pumping trucks.
    -   The Well Stimulation - Fracturing division took delivery and paid for
        two fracturing spreads. On November 21, 2007 the Trust entered into
        an asset sale agreement for these two fracturing spreads for an
        aggregate purchase price of $27.6 million.
    -   The Fishing and Rentals division added rentals, and fishing and pipe
        recovery tools for the new fishing and rentals locations.
    -   The Trust continued to convert divisions to its electronic field
        ticketing system.
    

    Liquidity
    ---------
    The Trust's adjusted working capital ratio at December 31, 2007 was 1.99
(December 31, 2006 - 1.32) (calculated as current assets divided by current
liabilities excluding current portion of long-term debt).
    The Trust's working capital deficiency, including current portion of
long-term debt, was $41.3 million at December 31, 2007. The Trust expects to
renegotiate the terms of its existing credit facilities prior to April 30,
2008. If the facilities are not renegotiated prior to that time all of the
outstanding amounts become due on April 30, 2008. The Trust has made
significant progress in reducing debt levels over the last 3 months.
Management is confident on the Trust's ability to source longer term credit
facilities to replace current debt. Refinanced debt, coupled with operating
cash flows, should enable to Trust to meet its working capital needs in 2008.
    On November 6, 2007, the Trust accepted an offer to sell certain
fracturing assets for an aggregate purchase price of $27.6 million. The
proceeds from the sale of these assets were used to reduce the current
outstanding long-term debt.

    Long-term debt
    --------------
    At December 31, 2007, the Trust had aggregate debt of $53.5 million.
    Of the total aggregate debt, term debt of $34,000 represents finance
contracts on specific equipment. This term debt is repayable in various
monthly installments and bears interest at a rate up to 2.9%, maturing in
2008. Collateral for the term debt is specific equipment. Obligations under
capital leases equate to $68,000 and are repayable in monthly installments
including interest at rates from 6.9% to 8.8%. Collateral for the capital
leases is specific equipment. Monthly installments for the term debt and
capital leases total approximately $25,000 per month.
    Amounts owing under these Credit Facilities rank in priority to amounts
payable to the Trust from Bonnett's Energy Services, L.P., Bonnett's Energy
Services Ltd. and Bonnett's Holding Trust, and the payments of any such
amounts will be prohibited upon a default under the credit agreement. Subject
to certain cash flow tests, the Trust may make distributions to the
unitholders so long as no default has occurred or would result from such
distribution. Defaults have been made during the year ended December 31, 2007
and distributions suspended.
    On August 7, 2007, the Trust negotiated credit facilities with a
syndicate of Canadian banks. The credit facilities consist of an extendible
revolving acquisition facility of up to $30.0 million and an extendible
revolving operating facility of up to $20.0 million subject to certain margin
calculations and $50.0 million non-revolving term facility. The revolving
operating and non-revolving term facilities are interest only until March 31,
2008. The revolving acquisition facility was to be retired October 31, 2007.
    As of October 31, 2007 and December 31, 2007, the Trust was in breach of
certain financial covenants under the facility. An amending agreement was
signed with the banking syndicate who have agreed to waive the breaches of the
specific financial covenants until April 30, 2008. Each of the Trust's
revolving operating facility, revolving capital acquisition facility and
non-revolving term facility will now mature on April 30, 2008. Management is
expecting to have the maturity date, as well as relief from certain covenants,
extended for a longer term prior to April 30 and is currently in negotiations
with its lenders. On December 19, 2007, the Trust negotiated an increase of
$3.4 million under its extendible revolving operating facility until February
29, 2008, $2.3 million from March 1 to 31, 2008 and $1.2 million from April 1
to 30, 2008.
    Collateral for the facility is a general assignment of book debts and a
general security agreement over all assets of the Trust. The revolving
acquisition facility and the non-revolving term facility are for the purposes
of acquiring new capital.
    As described in note 3 b) of the December 31, 2007 financial statements,
on January 1, 2007, the Trust adopted the new CICA requirements relating to
financial instruments. At December 31, 2007 no debt issue costs has been
netted against the long-term debt.

    
    Quarterly Financial Summary
    ---------------------------

    -------------------------------------------------------------------------
    Three Months Ended                                                  2007
    -------------------------------------------------------------------------
    ($000's except
    per unit
    amounts)     December 31  September 30   June 30    March 31       Total
    -------------------------------------------------------------------------
    Revenue from
     continuing
     operations       18,070      16,422      10,269      35,973      80,734
    EBITDAC from
     continuing
     operations(1)     1,819       1,952      (2,674)      9,957      11,054
    Funds flow
     from
     continuing
     operations(2)      (612)      1,036      (3,484)      9,257       6,197
    Funds flow from
     continuing
     operations per
     unit
      Per Unit
       - Basic         (0.05)       0.09       (0.30)       0.81        0.53
      Per Unit
       - Fully
       diluted         (0.05)       0.09       (0.30)       0.80        0.52
    Net income
     (loss) from
     continuing
     operations      (30,456)    (29,243)     (1,345)      5,097     (55,947)
    Net income
     (loss) from
     discontinued
     operations       (2,872)     (1,325)     (1,208)       (848)     (6,253)
    Net income
     (loss)          (33,328)    (30,568)     (2,553)      4,249     (62,200)
    Net income
     (loss) per
     unit from
     continuing
     operations
      Per Unit
       - Basic         (2.59)      (2.51)      (0.12)       0.44       (4.81)
      Per Unit
       - Fully
       diluted         (2.59)      (2.51)      (0.12)       0.44       (4.81)
    Net income
     (loss) per
     unit from
     discontinued
     operations
      Per Unit
       - Basic         (0.24)      (0.11)      (0.10)      (0.07)      (0.54)
      Per Unit
       - Fully
       diluted         (0.24)      (0.11)      (0.10)      (0.07)      (0.54)
    Net income
     (loss) per
     unit
      Per Unit
       - Basic         (2.83)      (2.62)      (0.22)       0.37       (5.35)
      Per Unit
       - Fully
       diluted         (2.83)      (2.62)      (0.22)       0.37       (5.35)
    Weighted
     average
     units
      Basic       11,773,849  11,645,453  11,558,361  11,498,373  11,630,182
      Diluted     11,773,849  11,645,540  11,623,795  11,613,500  11,630,182
    -------------------------------------------------------------------------
    Three Months Ended                                                  2006
    -------------------------------------------------------------------------
    ($000's except
    per unit
    amounts)     December 31  September 30   June 30    March 31       Total
    -------------------------------------------------------------------------
    Revenue from
     continuing
     operations       28,222      29,659      17,041      38,692     113,614
    EBITDAC from
     continuing
     operations(1)     4,872       9,359         748      16,299      31,278
    Funds flow
     from
     continuing
     operations(2)     4,345       9,055         581      16,140      30,121
    Funds flow from
     continuing
     operations
     per unit
      Per Unit
       - Basic          0.38        0.81        0.05        1.45        2.67
      Per Unit
       - Fully
       diluted          0.37        0.78        0.05        1.40        2.59
    Net income
     (loss) from
     continuing
     operations        2,944       7,074      (1,441)     11,402      19,979
    Net income
     (loss) from
     discontinued
     operations       (1,869)       (841)       (434)       (277)     (3,421)
    Net income
     (loss)            1,075       6,233      (1,875)     11,125      16,558
    Net income
     (loss) per
     unit from
     continuing
     operations
      Per Unit
       - Basic          0.26        0.63       (0.13)       1.02        1.77
      Per Unit
       - Fully
       diluted          0.25        0.61       (0.13)       0.99        1.72
    Net income
     (loss) per
     unit from
     discontinued
     operations
      Per Unit
       - Basic         (0.16)      (0.07)      (0.04)      (0.02)      (0.30)
      Per Unit
       - Fully
       diluted         (0.16)      (0.07)      (0.04)      (0.02)      (0.30)
    Net income
     (loss)
     per unit
      Per Unit
       - Basic          0.09        0.55       (0.17)       1.00        1.47
      Per Unit
       - Fully
       diluted          0.09        0.53       (0.17)       0.96        1.42
    Weighted
     average units
      Basic       11,476,671  11,246,474  11,245,989  11,146,540  11,279,734
      Diluted     11,717,637  11,656,525  11,723,952  11,559,161  11,629,722
    -------------------------------------------------------------------------
    Notes:
    (1) Refer to note (1) under the heading "Highlights".
    (2) Refer to note (2) under the heading "Highlights".
    


    The Trust's quarter-over-quarter operating results reflect the decrease
in revenue due to reduced industry utilization levels. The Trust's heavy
capital expansion completed in 2005 and 2006 through both acquisitions and
organic growth has not offset the declining industry activity. EBITDAC was
also negatively impacted by the multiple start-up costs of new divisions and
locations of the Trust. Concerns over natural gas inventory levels,
uncertainty surrounding the announcement of a new royalty framework for
Alberta, a change to taxation of income trusts in Canada and the rising
Canadian dollar have all significantly reduced current and projected industry
activity.

    Fourth Quarter Analysis of Continuing Operations
    ------------------------------------------------
    Revenue of $18.0 million was generated in the three months ended December
31, 2007, a decrease of $10.2 million or 36% from the three months ended
December 31, 2006 of $28.2 million.
    Of the decrease $6.8 million relates to wireline services. This division
saw a 12% decline in average ticket price as a result of the extremely
competitive market and the significant slowdown. The Trust also saw an
increase in number of bid jobs. Utilization rates decreased by 32% in this
quarter from the same quarter in 2006. Electric line services, which is more
dependent on new well completions, were affected to a greater extent than
slickline services in the fourth quarter of 2007. With the elimination of the
fracturing division, management has put a large focus in improving operations
of this division as it remains the Trust's most profitable division.
    A decrease of $3.0 million was seen in the Testing Services division.
Equipment used for testing is very easily portable. Oil and gas producers have
decreased activity and as such there are many more competitors for
significantly fewer jobs. This has directly pushed the average price per job
down 5% in the fourth quarter of 2007 versus the same period in 2006.
    The Well Stimulation - Pumping division remained constant in their
revenue despite having 2 more units in the fourth quarter of 2007 over 2006.
These units allowed the division to complete deeper more challenging jobs
increasing the average price per job by $2,720.
    The Fishing and Rentals division saw a $481,000 decline in revenue and a
47% decrease in the average ticket price from the fourth quarter of 2006 to
2007. Significant amounts were spent on capital in both 2006 and 2007. These
amounts were not able to offset the large industry decline in activity. The
Fishing and Rentals division has not been operation for longer than two years
and as such is still growing its revenue base. The Trust saw positive
contributions from this division in the last quarter of 2007 and looks forward
to more contributions in 2008.
    Operating costs as a percentage of revenue increased by 7% from the
fourth quarter of 2006. Significant changes as a percentage of revenue were as
follows:

    
    -   Wages and benefits increased by 4% of revenue. The competitive
        industry activity has resulted in an average price per job decrease;
        however, there has not been a corresponding decrease in the salaries
        paid to individuals to complete the work. In addition, the Fishing
        and Rentals division is carrying high wage costs as a percentage of
        revenue due to being in the beginning stage of its growth cycle.
        Normal wage costs are paid to employees to retain their services
        while revenues are continuing to improve.
    -   Purchases for resale have increased due to price increases and the
        type of jobs performed. With the industry focus on deeper work more
        consumables are required to complete services requested by the
        Trust's customers.
    -   The Trust has seen a large decrease in repairs and maintenance due to
        the termination of expansion in the fourth quarter of 2007 over 2006.
        In 2006, the Trust incurred significant setup costs for its new
        divisions and locations which did not qualify for capitalization
        under the Trust's policies. The Trust does not capitalize items or
        charges under $500.
    -   Fuel has increased as a percentage of revenue in the fourth quarter
        of 2007 over 2006 due to increasing diesel fuel costs. The majority
        of the Trust's units run on diesel fuel.
    -   Other costs increased to 5% of revenue in the fourth quarter of 2007
        due to increased amounts of bad debt. The Trust has put a focus on
        improving policies and procedures to help reduce this burden during
        these tougher times.

    -------------------------------------------------------------------------
    Three Months Ended
    December 31                     2007        2006      Change    % Change
    -------------------------------------------------------------------------
    ($000's except jobs completed, and utilization rates)
    -------------------------------------------------------------------------
    Revenue from continuing
     operations
      Wireline Services           13,202      19,953      (6,751)        (34)
      Testing Services             1,556       4,530      (2,974)        (66)
      Well Stimulation
       - Pumping                     994         940          54           6
      Fishing and Rentals          2,318       2,799        (481)        (17)
    -------------------------------------------------------------------------
                                  18,070      28,222     (10,152)        (36)
    Operating costs from
     continuing operations        14,824      21,257      (6,433)        (30)
    -------------------------------------------------------------------------
    Gross margin from
     continuing operations         3,246       6,965      (3,719)        (53)
    -------------------------------------------------------------------------
    Revenue per job completed
     from continuing operations
      Wireline Services             5.18        5.87       (0.68)        (12)
      Testing Services              3.54        3.73       (0.19)         (5)
      Well Stimulation
       - Pumping                    8.35        5.63        2.72          48
      Fishing and Rentals           4.67        8.75       (4.07)        (47)
    -------------------------------------------------------------------------
    Weighted average                5.02        5.53       (0.51)         (9)
    -------------------------------------------------------------------------
    Jobs completed (number)
     from continuing operations(1)
      Wireline Services            2,548       3,402        (854)        (25)
      Testing Services               440       1,216        (776)        (64)
      Well Stimulation
       - Pumping                     119         167         (48)        (29)
      Fishing and Rentals            496         320         176          55
    -------------------------------------------------------------------------
                                   3,603       5,105      (1,502)        (29)
    -------------------------------------------------------------------------
    Utilization (%)(2)
      Wireline Services               39          57         (18)        (32)
      Testing Services                16          44         (28)        (64)
      Well Stimulation
       - Pumping                      16          30         (14)        (47)
    -------------------------------------------------------------------------

    Revenue from discontinued
     operations                    1,283           -       1,283         100
    Operating costs from
     discontinued operations       2,886       1,378       1,508         109
    -------------------------------------------------------------------------
    Gross margin from
     discontinued operations      (1,603)     (1,378)       (225)         16
    -------------------------------------------------------------------------
    Revenue per job completed
     from discontinued operations     53           -          53         100
    Jobs completed (number) from
     discontinued operations(1)       24           -          24         100
    -------------------------------------------------------------------------
    Notes:
    (1) Refer to note (3) under the heading "Highlights".
    (2) Utilization statistics are not maintained for the Fishing and Rentals
        division.
    

    Outlook
    -------

    General industry conditions

    Concerns over natural gas inventory levels have caused prices to weaken
during the second half of 2006 and into 2007. The result has been a decrease
in activity levels that has extended into 2008. Shallow areas of the Western
Canadian Sedimentary Basin ("WCSB") have seen the most significant decrease in
activity; however, activity levels in deeper areas of the WCSB have also seen
a slowdown in the fourth quarter of 2006 and all of 2007. Further affecting
activity in the deeper areas of the WCSB is increased competition resulting
from the migration of equipment from other areas. As activity levels increase
in the shallow areas of the WCSB, this migration is expected to reverse.
    The rising Canadian dollar has also negatively impacted activity. As the
Canadian dollar rises, oil and gas producers see a decrease in revenue priced
in US dollars. Since most of their costs are priced in Canadian dollars, this
has the effect of reducing their profits.
    Significant uncertainty surrounds the royalty framework in Alberta. On
October 25, 2007, the Alberta government released its "New Royalty Framework".
The new framework contains increases in royalties on energy development; oil
sands, conventional oil and natural gas. Royalties will be set by a single
sliding rate formula containing separate elements that account for commodity
prices and production. All changes take effect January 2009 with no
grandfathering of existing projects. Various oil and gas producers have
expressed their concern over the increase in royalties and their anticipated
decrease in profits, and as such, may significantly reduce spending beyond
2008.
    The reduced drilling levels over the last year and a half has resulted in
reduced production of natural gas in the WCSB. This reduced production is
expected to eventually help correct the surplus of North American natural gas
in storage which in turn should result in an increase in drilling.

    
    Summarized Financial Information
    --------------------------------

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                             Bonnett's Energy Services Trust
                                                 Consolidated Balance Sheets
                                                       (thousands of dollars)

    December 31                                             2007         2006
    -------------------------------------------------------------------------

    Assets
    Current assets
      Cash                                                  118        2,667
      Accounts receivable                                18,304       29,483
      Inventory                                           1,567        2,076
      Assets held for sale                                6,145            -
      Prepaid expenses and deposits                       1,062        1,307
    -------------------------------------------------------------------------
                                                         27,196       35,533

    Property and equipment                               94,411      118,681
    Intangible assets                                         -        8,859
    Future income tax assets                              6,815        1,574
    Goodwill                                                  -       46,758
    -------------------------------------------------------------------------
                                                        128,422      211,405
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Unitholders' Equity
    Current liabilities
      Accounts payable and accrued liabilities            9,279       20,372
      Distributions payable                                   -        1,724
      Liabilities held for sale                           5,767            -
      Current portion of long-term debt                  53,469          283
    -------------------------------------------------------------------------
                                                         68,515       22,379

    Long-term debt                                            -       59,637
    -------------------------------------------------------------------------
                                                         68,515       82,016
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Unitholders' Equity
      Trust units                                       132,101      129,597
      Contributed surplus                                 1,052          512
      Deficit                                           (73,246)        (720)
    -------------------------------------------------------------------------
                                                         59,907      129,389
    -------------------------------------------------------------------------
                                                        128,422      211,405
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                             Bonnett's Energy Services Trust
     Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
                               (dollars in thousands except per unit amounts)

    Year Ended December 31                                 2007         2006
    -------------------------------------------------------------------------

    Revenue                                              80,734      113,614
    Expenses
      Operating costs                                    64,087       75,842
      General and administrative                          5,593        6,494
      Amortization of property and equipment              9,343        6,755
      Amortization of intangible assets                   3,039        3,308
      Impairment loss on goodwill and intangibles        52,478            -
      Impairment loss on assets held for sale               357            -
      Interest - current                                    412          237
      Interest on long-term debt                          4,445          856
      Unit-based compensation                               449          359
      Deferred finance costs                                  -          167
    -------------------------------------------------------------------------
                                                        140,203       94,018
    -------------------------------------------------------------------------

    Income (loss) before other items                    (59,469)      19,596
      Loss on sale of fixed assets                          790          280
    -------------------------------------------------------------------------
    Income (loss) before income taxes from
     continuing operations                              (60,259)      19,316
    -------------------------------------------------------------------------

    Income tax expense (recovery)
      Current                                                 -           64
      Future                                             (4,312)        (727)
    -------------------------------------------------------------------------
                                                         (4,312)        (663)
    -------------------------------------------------------------------------

    Net income (loss) for the year from
     continuing operations                              (55,947)      19,979
    -------------------------------------------------------------------------
    Net loss for the year from
     discontinued operations                             (6,253)      (3,421)
    -------------------------------------------------------------------------
    Net income (loss) and comprehensive income
     (loss) for the year                                (62,200)      16,558
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income (loss) per unit from
     continuing operations - basic                        (4.81)        1.77
    Net income (loss) per unit from
     continuing operations - diluted                      (4.81)        1.72
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net loss per unit from discontinued
     operations - basic                                   (0.54)       (0.30)
    Net loss per unit from discontinued
     operations - diluted                                 (0.54)       (0.30)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income (loss) per unit - basic                    (5.35)        1.47
    Net income (loss) per unit - diluted                  (5.35)        1.42
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    Disclosure Regarding Forward-Looking Statements
    -----------------------------------------------
    Certain statements contained in this news release constitute
forward-looking statements. When used in this document, the words "may",
"would", "could", "will", "intend", "plan", "anticipate", "believe", "seek",
"propose", "estimate", "expect", and similar expressions, as they relate to
the Trust, are intended to identify forward-looking statements. Such
statements reflect the Trust's current views with respect to future events and
are subject to certain risks, uncertainties and assumptions, including,
without limitation, those described in this news release under the heading
"Risks and uncertainties", and "Outlook". Many factors could cause the Trust's
actual results, performance or achievements to vary from those anticipated in
this news release. Should one or more of these risks or uncertainties
materialize, or should assumptions underlying forward-looking statements prove
incorrect, actual results may vary materially from those described in this
news release as intended, planned, anticipated, believed, estimated or
expected. Except where required by law, the Trust does not assume any
obligation to update these forward-looking statements if conditions or
opinions should change. Readers should not place undue reliance on
forward-looking statements.

    Additional Information
    ----------------------
    Additional information relating to the Trust is filed on SEDAR and can be
viewed at www.sedar.com. This information includes the Trust's Annual
Information Form dated March 31, 2008. Information can also be obtained by
contacting the Trust at Bonnett's Energy Services Ltd., R.R. 2, Site 33, Box
1, Grande Prairie, Alberta T8V 2Z9. Information is also available at the
Trust's website at www.bonnettsenergy.com.

    %SEDAR: 00022595E




For further information:

For further information: Murray Toews, Chief Executive Officer; or
Kelvin Torgerson, Chief Financial Officer, at (780) 830-2705, Fax: (780)
532-4811, Email: info@bonnettsenergy.com

Organization Profile

BONNETT'S ENERGY SERVICES TRUST

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