Bonnett's Energy Services Trust announces financial results for fiscal 2006.



    GRANDE PRAIRIE, AB, March 15 /CNW/ - Bonnett's Energy Services Trust
("Bonnett's" or the "Trust")(BT.UN) is pleased to report the results for
fiscal 2006. For the year ended December 31, 2006 the Trust generated revenue
of $113.7 million, EBITDAC of $28.8 million, and funds flow from operations of
$27.0 million ($2.32 per unit diluted) compared to revenue of $24.8 million,
EBITDAC of $9.0 million and funds flow from operations of $8.2 million ($0.90
per unit diluted) for the 101 day period ended December 31, 2005.
    Non-recurring start up costs, which were expensed during the year for
increasing service lines and locations, were approximately $3.7 million
including interest of approximately $600,000.
    The Trust generated revenue of $28.2 million, EBITDAC of $3.5 million and
funds flow from operations of $2.7 million ($0.23 per unit diluted) during the
fourth quarter of 2006 compared to revenue of $23.2, EBITDAC of $8.4 million
and funds flow from operations of $7.6 million ($0.82 per unit diluted) for
the same period in 2005.

    
    The fourth quarter of 2006 was adversely impacted by the following
factors:

    -  Manufacturing delays relating to the fracturing equipment delayed the
       start-up of that division until January 6, 2007 when the first job was
       completed. The division was fully staffed throughout the fourth
       quarter resulting in additional expenses carried by the Trust.
    -  Early snowfall before frost conditions set in resulted in lower
       activity levels due to the limited accessibility of certain locations.
       Also, warm weather later in the fourth quarter had a similar result.
    -  High natural gas storage levels and lower prices also contributed to
       lower utilization and margin levels in the quarter.

                    Management's Discussion and Analysis
    

    This Management Discussion and Analysis ("MD&A") has been prepared taking
into consideration information available to March 9, 2007. This discussion
focuses on key statistics from the December 31, 2006 Audited Consolidated
Financial Statements and pertains to known risks and uncertainties relating to
the oilfield services industry. This discussion should not be considered
all-inclusive, as it excludes changes that may occur in general economic,
political and environmental conditions. This discussion and analysis of the
financial condition and results of operations for the year ended December 31,
2006 should be read in conjunction with the Audited Consolidated Financial
Statements of the Trust for the year ended December 31, 2006 and related notes
and material therein. Additional information related to Bonnett's Energy
Services Trust (the "Trust") includes the Annual Information Form of the Trust
which will be filed with SEDAR on March 28, 2007 and will be available at
www.sedar.com.
    All amounts are expressed in Canadian dollars.

    
               Disclosure Regarding Forward-Looking Statements
               -----------------------------------------------
    

    Certain statements contained in this MD&A 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 MD&A 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 MD&A. 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 MD&A 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.

    
                           Comparative Information
                           -----------------------

    The comparative information for 2005 is for the 101 day period from the
formation of the Trust on September 22, 2005 until December 31, 2005. Because
of this short period, readers are cautioned that the 2005 results are not
considered directly comparable.

                                 Highlights
                                 ----------

    -------------------------------------------------------------------------
                                                          December 31
    -------------------------------------------------------------------------
                                                       2006          2005
    -------------------------------------------------------------------------
    (in thousands except per unit amounts and                       101 Day
     jobs completed)                                Year Ended   Period Ended
    -------------------------------------------------------------------------
    Revenue                                         $  113,682    $   24,850
    EBITDAC(1)                                      $   28,832    $    9,016
    Funds flow from operations(2)                   $   27,035    $    8,201
    Funds flow from operations per unit
      Per Unit - Basic                              $     2.40    $     0.90
      Per Unit - Fully diluted                      $     2.32    $     0.90
    Net earnings                                    $   16,558    $    5,400
    Earnings per unit
      Per Unit - Basic                              $     1.47    $     0.60
      Per Unit - Fully diluted                      $     1.42    $     0.59
    Distribution to unitholders                     $   19,679    $    2,999
      Distribution per unit - basic                 $     1.74    $     0.33
    Weighted average units
      Basic                                             11,280         9,078
      Diluted                                           11,630         9,114
    Jobs completed(3)                                   21,449         4,804
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    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 will 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 and invoiced during the period.

                                  Overview
                                  --------

    2006 was a year in which the Trust positioned itself for growth beyond
2007 through the completion of a significant capital expansion program. The
Trust's 2006 capital expenditure program was completed through equipment
construction and two business acquisitions more specifically:

    Internal Expansion
    -  $58.8 million of its 2006 capital expenditure program was for
       equipment construction and acquisition.
    -  Included above is $17.1 million in progress payments for fracturing
       spreads. The expenditure on the fracturing equipment will provide the
       Trust the ability to offer complimentary services to its customers
       operating in northern areas of the deep basin.
    -  The Trust's fracturing division commenced commercial operations on
       January 6, 2007. No fracturing stimulation services were completed in
       2006 as previously anticipated by management due to significant
       manufacturing delays.
    -  The Trust expanded its rentals, fishing and pipe recovery services to
       Red Deer, Grande Prairie, and Nisku, Alberta and Estevan,
       Saskatchewan. Capital costs related to this expansion have allowed the
       Trust to add complimentary but diverse oilfield services in addition
       to geographic diversification.
    -  The Trust expanded its slick wireline services to Dawson Creek, B.C.,
       Grande Cache, Drayton Valley and Rocky Mountain House, Alberta. With
       this expansion, and the additional capital spent on existing wireline
       divisions and locations, The Trust has become one of the largest
       wireline service providers in Western Canada.

    Business Acquisitions
    -  January 16, 2006, the Trust added eight electric line units to its
       existing fleet via the acquisition of Independent Wireline Inc., with
       locations in Red Deer, Whitecourt, and Calgary, Alberta.
    -  October 2, 2006, the Trust added four swabbing rigs and two pressure
       tanks to its wireline services division via the acquisition of
       Silverline Swabbing located in Beaverlodge, Alberta. In addition,
       Silverline had two swabbing rigs under construction, which were
       delivered in November 2006 and January 2007.

    As a result of the above 2006 internal expansion and business acquisitions
and the proposed 2007 capital expenditure program, the Trust's estimated fleet
is as follows:

    -------------------------------------------------------------------------
                                                                   Projected
                                     Annual  Operating                Ending
                         Unit of   Weighted   December Deliveries       2007
                         Measure    Average   31, 2006    in 2007    Balance
    -------------------------------------------------------------------------
    Wireline               Units         51         66          6         72
    -------------------------------------------------------------------------
    Testing                Units         26         30          -         30
    -------------------------------------------------------------------------
    Stimulation            Units          5          6          2          8
    -------------------------------------------------------------------------
    Fracturing      Full spreads          -          -          2          2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -  Four wireline units were delivered in January of 2007. One is
       anticipated in the month of March, and another in April.
    -  The stimulation services division took delivery of its two units in
       February 2007.
    -  The Trust's fracturing and stimulation division took delivery of its
       first spread in January 2007 and the second spread is anticipated in
       June 2007.
    -  The Trust is continually reviewing utilization rates for equipment at
       its various locations. The Trust routinely reallocates assets based on
       various statistics to achieve maximum utilization and return on
       capital.

    The Trust has the following plans for 2007 to strengthen its operations.
    -  The main focus for 2007 is to allocate the Trust's equipment to areas
       with the highest utilization levels.
    -  The Trust will be working on eliminating overlap and reducing the
       number of operating entities under its fold. During the first quarter
       of 2007 management has reduced the number of operating entities in its
       wireline services and well stimulations divisions by three to create
       efficiencies and streamline operations. These efficiencies will also
       help the Trust capitalize on the anticipated rebound in activity
       levels in the fourth quarter of 2007 and 2008.
    -  The 2007 capital budget has been minimized to reflect anticipated
       lower activity levels in the second and third quarters of the year.

                           Description of Services
                           -----------------------
    The Trust manages its oilfield services within four operating divisions as
follows:

                              Wireline Services
    

    Slickline
    Slickline is a continuous spool of metal wire that ranges in size from
0.92" to 0.188" and up to 25,000' in length and is coiled on a large drum on
the back of the wireline truck. The slickline is run into oil and gas
wellbores with different configurations to remove unwanted obstructions,
obtain bottom hole pressures and temperatures, and to increase well production
and control flow. Approximately 60% of the Trust's slickline revenue is
derived from producing wells.

    Electric Line
    Electric line is a braided cable with a conductor in the centre of the
cable ranging in size from 0.224" to 0.380" and up to 25,000' in length and is
coiled on a large drum on the back of the wireline truck. The electric line is
lowered into oil and gas wellbores with multiple types of electrically powered
sonde tools and perforating guns. The sonde tools provide information on
formations, cement quality, casing diameters and thickness, quantities and
types of producing fluid and other down hole data. Perforating guns are run
down oil and gas wellbores to perforate the casing to bring the oil and gas
from the formations. Approximately 60% of the Trust's electric line revenue is
derived from new well completion work.

    Swabbing
    Swabbing is performed by a derrick unit (similar to a small service rig)
to remove liquids from within the wellbore and allow reservoir pressure to
push all fluids up the tubing or casing. In wells with high water cuts,
swabbing is needed on a regular basis to keep the water column from choking
off production and shutting the well in prematurely. Approximately 50% of the
Trust's swabbing revenue relates to producing wells and 50% relates to new
completions. In general, as oilfields age, production depletes and wells take
in more water increasing the need for swabbing services.

    
                              Testing Services
    

    Testing
    Surface testing measures the quantity and type of fluids and/or gasses
being produced by a single wellbore. Surface equipment is usually tied into
the wellhead, in-line with a production tank on location or a pipeline entry
on the lease. Flow rates are measured during extended flow periods to
calculate well potential. Shut in tests (after extended well flow) allows the
calculations of reservoir reserves. Approximately 60% of the testing services
division's revenue is generated from new well completions, with the remaining
40% generated from other work performed throughout the life of the well.

    
                              Well Stimulation
    

    Fracturing Services
    Fluid is pumped at a high pressure down oil and gas wells to fracture the
earth's formations. Chemicals are added to the fluid and inserted into the
fracture to hold the formation open. This opening permits oil and gas to flow
more freely into the wellbore improving production.

    Acidizing Services
    Acidizing is completed on producing wells to improve production rates.
Unwanted obstructions are dissolved by pumping large volumes of chemicals down
producing oil and gas wells.

    Nitrogen Services
    Nitrogen is an inert gas (will not explode or is not flammable under most
conditions) used to purge wellbores or equipment on location. Pumping nitrogen
down a well will ensure that a non-explosive environment will be created
down-hole in the casing; this will prevent unexpected downhole explosions.
Nitrogen is also used to circulate out poisonous gases (such as hydrocardon
gases containing hydrogen sulfide - H2S) from tubing or surface pipeline in
order to have personnel safely remove equipment from a well.

    
                             Fishing and Rentals
    

    Fishing and Pipe Recovery
    The fishing and pipe recovery division provides specially trained
personnel to recover wireline tools, drill pipe, packers, tubing and any other
equipment left downhole or stuck during drilling and completion operations.
Equipment can be run from the Trust's own wireline units, or on third party
wireline units.

    Rentals
    The rentals division is a supplier of oilfield rental equipment to be
used on drilling and service rigs. Rental equipment includes power swivels,
downhole fishing, work over and completion tools that are used in the
drilling, completions and work over services.

    For financial reporting purposes, management views the Trust's operations
as a single business segment due to the similarity of their operations and
services, common customer bases, geographic concentration in the Western
Canadian Sedimentary Basin ("WCSB"), and the single focus on the oilfield
services sector. Business units, also referred to as "operating entities" are
not subsidiaries and although each business unit reports and measures
profitability to an Earnings Before Interest, Taxes, Depreciation,
Amortization, and unit based compensation expense ("EBITDAC") level, certain
costs and expenses are only determined at the Trust level and are not
allocated to business units. The chief operating decision makers are the same
for all the business units.


    
                           Results From Operations
                           -----------------------
                                   Revenue
    -------------------------------------------------------------------------
                                                          December 31
    -------------------------------------------------------------------------
                                                       2006          2005
    -------------------------------------------------------------------------
    (000's except jobs completed data, and                          101 Day
     utilization rates)                             Year Ended   Period Ended
    -------------------------------------------------------------------------
    Revenue
      Wireline Services                             $   82,731    $   17,677
      Testing Services                                  19,644         5,730
      Well Stimulation                                   4,384           781
      Fishing and Rentals                                6,923           662
    -------------------------------------------------------------------------
                                                       113,682        24,850
    Operating costs                                     78,356        14,634
    -------------------------------------------------------------------------
    Gross margin                                    $   35,326    $   10,216
    -------------------------------------------------------------------------
    Gross margin as a percentage of revenue (%)             31            41
    -------------------------------------------------------------------------
    Revenue per job completed
      Wireline Services                             $     6.11    $     5.36
      Testing Services                                    3.46          4.41
      Well Stimulation                                    6.22          8.68
      Fishing and Rentals                                 4.53          5.76
    -------------------------------------------------------------------------
    Weighted average                                $     5.30    $     5.17
    -------------------------------------------------------------------------
    Jobs completed (number)(1)
      Wireline Services                                 13,538         3,300
      Testing Services                                   5,677         1,299
      Well Stimulation                                     705            90
      Fishing and Rentals                                1,529           115
    -------------------------------------------------------------------------
                                                        21,449         4,804
    -------------------------------------------------------------------------
    Utilization (%)(2)
      Wireline Services                                     70            85
      Testing Services                                      56            76
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Notes:
    (1) Refer to note(3) under the heading "Highlights".
    (2) Utilization statistics are not maintained for the Well Stimulation
        and Fishing and Rentals divisions.
    

    For the year ended December 31, 2006, the Trust generated revenues of
$113.7 million which was higher than revenues generated during the 101 day
period ended December 31, 2005 by $88.8 million. Revenue for the year ended
December 31, 2006 was $13.3 million lower than the target of $127.0 million.
Most of the shortfall in revenue can be attributed to the well stimulation and
testing services divisions. Well stimulation services missed its revenue
target by $6.2 million due to manufacturing delays associated with the
fracturing and acid pumping equipment. The testing services division missed
its revenue target by $5.1 million primarily due to a drop off in utilization
levels in the second half of 2006.
    Utilization rates for the wireline services division were 3% lower than
expected for the 2006 year. Slickline services utilization rates exceeded
expectations, however, electric line services more than offset that increase
due to the slowdown in new well completions in the second half of the year.
Average revenue per job was 12% higher than expected for the wireline division
primarily due to a focus on deeper and more complex work.
    Utilization rates for the testing services division were 3% lower than
expected for the 2006 year. Although utilization rates exceeded expectations
in the first half of the year, utilization rates in the second half were
significantly lower than expected. In addition, the average revenue per job
was 29% lower than expected due to pricing pressure associated with the
decrease in activity.
    The last quarter of 2005 had record rates of activity in the oil and gas
industry, which is reflected by the Trust's higher utilization rates in 2005.
The Trust had higher utilization during the first quarter of 2006 with a
typical decrease through spring break-up. During the third and fourth quarters
of 2006 concerns over natural gas inventory levels caused natural gas prices
to weaken, resulting in a decrease in activity, particularly in the fourth
quarter. An unusually warm winter in Canada during the latter part of the
fourth quarter of 2006 also resulted in prolonged road closures.
    Gross margin as a percentage of revenue was 7% lower than budget of
approximately 38%. This decrease as a comparison to budget was a result of the
extensive internal expansion and lower levels of drilling and completion
activities during the second half of 2006. This has had a negative effect on
gross margin.
    Expansion costs of the well stimulation division, relating to fracturing
services had the effect of reducing gross margin as a percentage of revenue of
the Trust by approximately 2% or $2.4 million. In addition, the expansion of
the wireline services and fishing and rentals divisions decreased gross margin
as a percentage of revenue by approximately 1% or $636,000. Also, additional
one time bonuses of $380,000 were recorded in the year with respect to the
2005 year. This change in estimated bonuses has been expensed in the current
year. These items increased operating costs by approximately $3.5 million for
the year or approximately 3% of revenue.
    The additional 4% shortfall in gross margin can be explained by the
slowdown in new well completions in the second half of 2006.

    
                               Operating Costs
    -------------------------------------------------------------------------
                                                December 31
    -------------------------------------------------------------------------
                                       2006                    2005
    -------------------------------------------------------------------------
                                                                        % of
                                                                     revenue
                                                % of     101 Day     101 Day
                                             revenue      Period      Period
    (000's)                   Year Ended  Year Ended       Ended       Ended
    -------------------------------------------------------------------------
    Wages and benefits        $   36,270          32  $    6,439          26
    Purchases for resale           9,756           9       1,966           8
    Equipment rental               5,832           5       1,404           6
    Repairs and maintenance        7,576           7       1,153           5
    Subcontract                    3,636           3         843           3
    Fuel                           3,543           3         790           3
    Travel and meals               2,624           2         541           2
    Rent                           1,999           2         309           1
    Safety and training            1,517           1         243           1
    Communications                 1,347           1         277           1
    Insurance, license and
     permits                       1,329           1         183           1
    Other expenses                 2,927           3         486           2
    -------------------------------------------------------------------------
    Operating costs           $   78,356          69  $   14,634          59
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Operating costs increased from the 101 day period ended December 31, 2005
by $63.7 million. This increase is a result of the longer time frame, the
internal expansion and the increase in capacity of the Trust. Operating costs
for the period were 69% of revenues. Expenses as a percentage of revenue have
remained consistent from the previous period except as described below.
    Wages and benefits increased as a percentage of revenue by 6% from the 101
day period ended December 31, 2005 due to the following:

    -  The Trust introduced an employee unit purchase plan included in wages
       and benefits for the first time in the third quarter of 2006 for a
       cost of $87,500.
    -  During the year the Trust incurred wages of $1.8 million to prepare
       for the delivery of the equipment under construction and the start up
       of eight new full service locations.
    -  Additional bonuses of $380,000 were recorded in the year with respect
       to the 2005 year as discussed above.
    -  Workers compensation rates increased from the previous period.
    -  The Trust hired skilled personnel for the fracturing division during
       the second half of 2006. The Trust implemented this strategy to ensure
       manpower due to the shortage of knowledgeable and skilled workers in
       Alberta. As of the end of the year, the first two fracturing spreads
       are fully crewed with a very high level of experience. This has had a
       temporary negative effect on earnings during the year; however, the
       long term benefits from this strategy will be recognized once the
       fracturing division commences operations in the first quarter of 2007.
    -  The labour shortage in Alberta has caused an increase in total
       compensation rates from previous years in most oilfield services.
    

    In the year, the Trust incurred set up costs of approximately $2.4
million, including $1.4 million of wages for the well stimulation division.
During the year, the fishing and rentals division also expanded into four new
locations incurring carrying costs of $376,000 for the period. The wireline
services division expanded to four additional locations with associated
carrying costs of $260,000 for the period. All costs related to these
expansions have been expensed (not capitalized) in operating costs for the
year.
    Purchases for resale was 9% of revenue for 2006. This met the Trust's
expectations for the year.
    Repairs and maintenance for 2006 was approximately 1% higher than
expectations. The Trust incurred a large amount of setup costs for the above
noted expanded locations, which did not qualify for capitalization under the
Trust's accounting policies. The Trust does not capitalize individual items or
charges under $500. The costs which did not qualify for capitalization were
expensed under repairs and maintenance. The Trust currently operates a newer
fleet of equipment and does not anticipate large repairs and maintenance costs
in the near future.
    Other expenses increased to 3% of revenues. The Trust expanded into new
locations increasing supplies and property taxes. Included in other expenses
are advertising, bad debts, supplies, property taxes and freight.
    The Trust has and continues to develop close relationships with key
suppliers. Operating supplies are purchased from vendors in the areas where
the Trust operates as well as in bulk to maximize on volume discounts. The
supplier base is diverse to ensure no over-reliance on any one source. The
Trust looks to continually improve on this process as the dollar amount is
significant. We have made significant progress bringing our acquisitions under
one brand to build on Bonnett's name and reduce costs.

    
                           Unit-based Compensation

    -------------------------------------------------------------------------
                                                          December 31
    -------------------------------------------------------------------------
                                                       2006          2005
    -------------------------------------------------------------------------
                                                                    101 Day
    (000's)                                         Year Ended   Period Ended
    -------------------------------------------------------------------------
    Unit-based compensation                         $      440    $      138
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Trust recorded unit-based compensation expense of $440,000 for the
estimated cost associated with the Trust's option plan for the year ended
December 31, 2006. The options were issued during the year on January 16, May
26, July 24, August 31, and October 2, 2006 and have a four year term and vest
one-third per year over three years commencing on the first anniversary of the
date of the grant.

                         General and Administrative

    -------------------------------------------------------------------------
                                                December 31
    -------------------------------------------------------------------------
                                       2006                    2005
    -------------------------------------------------------------------------
                                                                        % of
                                                                     revenue
                                                % of     101 Day     101 Day
                                             revenue      Period      Period
    (000's)                   Year Ended  Year Ended       Ended       Ended
    -------------------------------------------------------------------------
    Wages and benefits        $    3,321         3.0  $      662         3.0
    Professional fees              1,434         1.0         171         0.7
    Travel and meals                 406         0.8          41         0.1
    Advertising                      276         0.2          97         0.3
    Other                          1,057         1.0         229         0.9
    -------------------------------------------------------------------------
    General and
     administrative           $    6,494         6.0  $    1,200         5.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    In aggregate, the Trust's general and administrative expenses were
approximately 6% of revenues, an increase of $5.3 million or 1% of revenue
from the 101 day period ended December 31, 2005. General and administrative
costs as a percentage of revenue have remained consistent except for the
following:
    -  Professional fees increased to 1% of revenue. The Trust increased
       efforts to comply with regulatory requirements on internal controls of
       which approximately $100,000 is included in general and administrative
       costs. A subcontractor was used to support the Trust's financial
       accounting program and these costs are included in professional fees.
       Management is focused on automating processes and controls and has
       been relying on the subcontractor to assist in the execution of this
       process. This automation should increase the efficiency of the Trust's
       billing system and improve the accounts receivable collection time.
    -  Selling general and administrative costs that relate to the expansion
       of the Trust's services are estimated at approximately $595,000. These
       costs relate to the use of the Trust's aircraft, sales wages, as well
       as legal and accounting costs.

                                Amortization

    -------------------------------------------------------------------------
                                                          December 31
    -------------------------------------------------------------------------
                                                       2006          2005
    -------------------------------------------------------------------------
                                                                    101 Day
    (000's)                                         Year Ended   Period Ended
    -------------------------------------------------------------------------
    Amortization of property and equipment          $    6,885    $    1,073
    Amortization of intangible assets                    3,308           535
    -------------------------------------------------------------------------
                                                    $   10,193    $    1,608
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The increase in the amortization expense from the 101 day period ended
December 31, 2005 was due to the execution of $58.8 million (excluding
business acquisitions) of the 2006 capital expenditure program (refer to
Capital Expenditures section for more detail). Intangible assets were
amortized a full year rather than a portion of the year for all acquisitions
completed in 2005. The Trust also completed two acquisitions which increased
the amortization expense. In addition the Trust expensed approximately
$184,000 in intangibles for contractors and employees that no longer work for
the Trust.

                     Interest and Deferred Finance Costs

    -------------------------------------------------------------------------
                                                          December 31
    -------------------------------------------------------------------------
                                                       2006          2005
    -------------------------------------------------------------------------
                                                                    101 Day
    (000's)                                         Year Ended   Period Ended
    -------------------------------------------------------------------------
    Deferred finance costs                          $      167    $       21
    Interest - current                                     237            17
    Interest - long-term                                 1,496            48
    -------------------------------------------------------------------------
    Total interest                                       1,733            65
    -------------------------------------------------------------------------
    Interest and deferred finance costs             $    1,900    $       86
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Long-term interest is attributable to the revolving acquisition facility
being drawn to approximately $60.0 million at December 31, 2006 to fund the
2006 capital budget. At December 31, 2005, no bank facilities were drawn.
    2006 current interest expense is directly related to the Trust utilizing
overdraft through its revolving facility throughout various parts of the year.
At December 31, 2005, the Trust did not have any short or long term amounts
outstanding on its banking facilities.
    Deferred finance costs relate to costs incurred to obtain bank financing,
amortized over the life of the facilities.

    
                                Income Taxes

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                                                          December 31
    -------------------------------------------------------------------------
                                                       2006          2005
    -------------------------------------------------------------------------
                                                                   101 Day
    (000's)                                         Year Ended   Period Ended
    -------------------------------------------------------------------------
    Current tax expense                             $       64    $      750
    Future tax expense (recovery)                         (603)          969
    -------------------------------------------------------------------------
                                                    $     (539)   $    1,719
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The future income tax expense (recovery) represents changes in timing
differences between the carrying value of assets and liabilities for financial
statement purposes and their respective tax values.
    The current tax expense for 2006 represents the difference between the
tax amounts estimated for the 2005 tax year and the actual. The amount was not
material to the Trust and as such was included as a 2006 expense. The 2005
current income tax expense represents cash taxes paid by the Trust on
undistributed earnings. Because the Trust was formed part way through 2005,
the tax deductions available were limited for the first year. This effect only
takes place in the initial year and the Trust is not expected to be subject to
cash taxes in 2007.

    
    Available ending tax pools are as follows:

    -------------------------------------------------------------------------
                                                          December 31
    -------------------------------------------------------------------------
                                                          2006          2005
    -------------------------------------------------------------------------
    (000's)                                              As at         As at
    -------------------------------------------------------------------------
    Cumulative eligible capital                     $   40,643    $   31,879
    Undepreciated capital cost                         120,088        53,443
    Share issuance costs                                 3,561         4,547
    Deferred financing costs                               231           250
    -------------------------------------------------------------------------
    Balance at end of period                        $  164,523    $   90,119
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                Net Earnings

    -------------------------------------------------------------------------
                                                          December 31
    -------------------------------------------------------------------------
                                                       2006          2005
    -------------------------------------------------------------------------
                                                                    101 Day
    (000's except per unit amounts)                 Year Ended   Period Ended
    -------------------------------------------------------------------------
    Net earnings                                    $   16,558    $    5,400
    Earnings per unit
      Basic                                               1.47          0.60
      Diluted                                       $     1.42    $     0.59
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Net earnings increased $11.2 million from the 101 day period ended
December 31, 2005 with more time and added capacity over the December 31, 2005
period being the most significant factors. Although net earnings increased,
they were lower than anticipated primarily due to costs associated with the
Trust's expansion and lower activity levels during the second half of 2006 as
discussed above.
    The Trust expects to translate its strengthened capabilities to improve
bottom line performance. The Trust continues to work to ensure the right
people are in the right roles and will work to maintain and build on its
customers relationships.

    
                       Consolidated Financial Position
                       -------------------------------

    The following table outlines significant changes in the consolidated
balance sheets from December 31, 2005 to December 31, 2006:

    -------------------------------------------------------------------------
                                Change
                               ($000's)                Explanation
    -------------------------------------------------------------------------
    Cash and cash equivalents   (3,361)    Decrease due to the execution of
                                           the 2006 capital expenditure
                                           program.
    Accounts receivable          2,195     Increase due to more equipment
                                           working in 2006 through the
                                           capital expenditures and the two
                                           business acquisitions completed
                                           during the year.
    Inventory                    1,351     Increase due to more inventory on
                                           hand to supply the Trust's larger
                                           equipment fleet and two fracturing
                                           spreads to be delivered in 2007.
                                           There was also an increase in
                                           inventory from the two
                                           acquisitions completed in 2006.
    Prepaid expenses and           613     Increase due to additional bank
    deposits                               facility fees and larger
                                           outstanding amounts for the
                                           prorate and insurance on the
                                           larger fleet.
    Property and equipment      63,531     Increase (net of amortization
                                           expense and disposals) primarily
                                           due to the acquisition of
                                           Independent Wireline Inc.,
                                           Silverline Swabbing Ltd., and the
                                           execution of the 2006 capital
                                           budget (see Capital Expenditure
                                           section for more detail).
    Intangible assets            1,010     Increase (net of amortization)
                                           relates to the purchase of
                                           Silverline Swabbing Ltd. and
                                           Independent Wireline Inc.
    Future income tax assets       621     Increase due to the purchase of
                                           significant capital through the
                                           capital budget and the two
                                           acquisitions completed in 2006
                                           have caused the accounting basis
                                           of the property and equipment to
                                           be less than their tax basis.
    Goodwill                    11,447     Increase due to the acquisition of
                                           Silverline Swabbing Ltd. and
                                           Independent Wireline Inc. The
                                           Trust also had an increase due to
                                           Hess Oilfield Services meeting a
                                           certain earnings target set in the
                                           original 2005 purchase agreement.
    Accounts payable and         4,899     Change due to the increase in
    accrued liabilities                    activity from the acquisitions of
                                           Silverline Swabbing Ltd. and
                                           Independent Wireline Inc. and the
                                           Trust's capital expansion program.
    Distribution payable           655     Change due to the increase in
                                           trust units outstanding from the
                                           two acquisitions completed during
                                           the year, employees exercising
                                           their vested options and an
                                           increase in the distribution rate.
    Income taxes payable          (750)    Decrease due to the availability
                                           of a full year of tax deductions
                                           for the Trust.
    Long-term debt (current     59,198     Increase due to the need to draw
    and long-term)                         on the bank debt to fund the 2006
                                           capital program and two
                                           acquisitions completed during the
                                           year.
    Trust units                 16,152     Increase due to the Trust units
                                           issued as consideration for the
                                           acquired businesses and employees
                                           exercising vested options.
    Contributed surplus            374     Increase due to the expensing of
                                           the unit option plan net of
                                           amounts exercised by employees.
    Accumulated                 19,679     Increase due to monthly
    distributions                          distributions declared to
                                           unitholders.
    -------------------------------------------------------------------------


                                Distributions
                                -------------
    -------------------------------------------------------------------------
                                                          December 31
    -------------------------------------------------------------------------
                                                       2006          2005
    -------------------------------------------------------------------------
    (000's except per unit
     amounts)                             Year Ended    101 Day Period Ended
    -------------------------------------------------------------------------
                                   Total    Per Unit       Total    Per Unit
    Distributions to
     unitholders - declared   $   19,679  $     1.74  $    2,999  $     0.33
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The Trust made distributions of $0.12 per unit for January and February
of 2006 and increased the distribution level to $0.15 per unit per month for
the remainder of 2006. All of the distributions completed in 2006 have been
made against unitholders equity and were funded from funds flow from
operations before changes in working capital. The actual distributions were
paid using funds available from a variety of sources including cash flow from
operating activities, advances on long-term debt and available operating lines
of credit. The Trust has exceeded the expected distributed amount disclosed in
its initial public offering prospectus (dated September 14, 2005) of $0.10 per
unit per month.

    
                         Funds flow from Operations
                         --------------------------

    -------------------------------------------------------------------------
                                                December 31
    -------------------------------------------------------------------------
    (000's)                            2006                    2005
    -------------------------------------------------------------------------
                                                         101 Day
                                                          Period
                              Year Ended    Per Unit       Ended    Per Unit
    -------------------------------------------------------------------------
    Cash flow from
     operations, including
     changes in non-cash
     working capital items    $   20,844  $     1.85  $   (4,158) $    (0.46)
    Net change in non-cash
     working capital items         6,191        0.55      12,359        1.36
    -------------------------------------------------------------------------
    Funds flow from
     operations(1)            $   27,035  $     2.40  $    8,201        0.90
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Notes:
    (1) Refer to note (2) under the heading "Highlights".

                            Investing Activities
                            --------------------

    Net amounts expended on investing activities in the year were $65.0
million. This was primarily the result of the execution of the 2006 capital
budget (see the Capital Expenditures section for more details) and the
purchase of Independent Wireline Inc. and Silverline Swabbing Ltd.

                            Business Acquisitions

    On January 16, 2006, the Trust completed the acquisition of substantially
all the assets of Independent Wireline Inc., an oilfield service company, for
an aggregate purchase price of $22.1 million (including acquisition costs).
The purchase price was funded by payments of $10.6 million in cash and the
issuance by the Trust of 559,403 trust units at the five day weighted average
trading price of $20.60 per unit. The purchase of Independent Wireline Inc.
added eight electric line units to the Trust's existing fleet.

    -------------------------------------------------------------------------
                                                                 Independent
           (000's except per unit amounts)                     Wireline Inc.
    -------------------------------------------------------------------------
    Net assets acquired
    -------------------------------------------------------------------------
      Current assets                                              $      423
      Property and equipment                                           9,699
      Intangible assets                                                3,388
      Goodwill                                                         8,601
    -------------------------------------------------------------------------
                                                                  $   22,111
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Consideration
    -------------------------------------------------------------------------
      Cash                                                        $   10,490
      Acquisition costs                                                   97
      Trust units (559,403 units)                                     11,524
    -------------------------------------------------------------------------
                                                                  $   22,111
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    On October 2, 2006, the Trust completed the acquisition of substantially
all the assets of Silverline Swabbing Ltd. and a related company, for an
aggregate purchase price of $5.7 million (including acquisition costs). The
purchase price was funded by the payments of $1.6 million in cash and the
issuance by the Trust of an aggregate of 182,815 trust units at the five day
weighted average trading price of $21.59 per unit. The purchase of the
companies added four swabbing rigs and two pressure tanks to the Trust's
existing fleet with an additional two swabbing rigs under construction.

    -------------------------------------------------------------------------
                                                                  Silverline
                                                               Swabbing Ltd.
                                                                   & 1078336
           (000's except per unit amounts)                      Alberta Ltd.
    -------------------------------------------------------------------------
    Net assets acquired
    -------------------------------------------------------------------------
      Current assets                                              $      150
      Property and equipment                                           2,730
      Intangible assets                                                  930
      Goodwill                                                         1,846
    -------------------------------------------------------------------------
                                                                  $    5,656
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Consideration
    -------------------------------------------------------------------------
      Cash                                                        $    1,630
      Acquisition costs                                                   79
      Trust units (182,815 units)                                      3,947
    -------------------------------------------------------------------------
                                                                  $    5,656
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    On November 30, 2005 the Trust completed the acquisition of substantially
all the assets of Hess Oilfield Services Ltd. for an aggregate purchase price
of $8.8 million and a commitment to pay an additional $1.0 million if a
certain earnings target was achieved by the acquired business within the first
fiscal year of operations. A $1.0 million liability was recorded by the Trust
on December 1, 2006 as a result of the acquired business achieving the
earnings target. This amount has been recorded as additional goodwill.

                            Capital Expenditures

    The Trust's capital expenditures consist of maintenance and investment
capital. Maintenance capital is the capital required to replace the assets to
sustain existing levels of operating funds flow. Investment capital consists
of expenditures incurred to generate incremental operating funds flow.
Maintenance capital for the year ended December 31, 2006 totaled approximately
$1.3 million.
    Capital expenditures, excluding business acquisitions, are summarized as
follows:

                    ----------------------------------
                                          2006 Capital
                      (000's)             Expenditures
                    ----------------------------------
                    Wireline Services    $      22,516
                    ----------------------------------
                    Testing Services             3,756
                    ----------------------------------
                    Well Stimulation            20,766
                    ----------------------------------
                    Fishing and Rentals          7,632
                    ----------------------------------
                    General Trust                4,138
                    ----------------------------------
                    Total                $      58,808
                    ----------------------------------
                    ----------------------------------

    -  The wireline services division added one swabbing rig, 28 truck
       mounted wireline units for $22.5 million and associated tools and
       equipment.
    -  The testing services division added eight complete testing packages
       and related tools and equipment.
    -  $3.7 million expended on the well stimulation division primarily
       related to the addition of three nitrogen trucks.
    -  $17.1 million was made in progress payments for two fracturing
       spreads. The Trust completed its first fracturing stimulation job on
       January 6, 2007 with high expectations for the future.
    -  Also included is $7.6 million in rental tools for the existing and new
       fishing and rentals locations.
    -  A twin engine turboprop aircraft was purchased for $3.2 million for
       the Trust to utilize. General Trust capital includes the aircraft and
       other items to improve on the Trust's operations and internal
       controls.
    -  The acquisitions completed in 2006 added eight wireline units, four
       swabbing units and two pressure tanks not included in the discussion
       above.
    

    Levels of maintenance capital and repairs and maintenance ("R&M") expense
are dependent on equipment utilization, crew experience levels, weather and
other operational factors. As a result, the amount and timing of maintenance
capital and R&M expense may fluctuate. In addition, maintenance capital
expenditures and R&M expense do not occur proportionately throughout each
quarter of the year. A larger proportion of these costs are incurred in the
second quarter of each year, which is typically a period of equipment
refurbishment. Costs for repairs and maintenance are included in the R&M
expense.

    
                             Unitholders' Equity
                             -------------------

    On January 16, 2006, the Trust issued 559,403 trust units priced at the
five day weighted average trading price of $20.60 per unit as part of the
consideration for the acquisition of the assets of Independent Wireline Inc.
    On October 2, 2006, the Trust issued 182,815 trust units priced at the
five day weighted average trading price of $21.59 per unit as part of the
consideration for the acquisition of the assets of Silverline Swabbing Ltd.
and 1078336 Alberta Ltd.
    Bonnett's Energy is authorized to issue an unlimited number of Trust units
and an unlimited number of special voting rights. There are currently no
special voting rights issued.

    -------------------------------------------------------------------------
           (000's except per unit amounts)         Trust Units        Amount
    -------------------------------------------------------------------------
    Trust units at December 31, 2005                    10,686    $  113,445
    Trust units issued as consideration for
     the acquired businesses                               742        15,471
    Trust units issued upon the exercise of
     unit options                                           64           706
    Trust unit issue costs, net of future tax
     benefit of $17                                          -           (25)
    -------------------------------------------------------------------------
    Trust units at December 31, 2006                    11,492    $  129,597
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Diluted average number of trust units outstanding is calculated using the
treasury stock method. The amounts outstanding are as follows:

    -------------------------------------------------------------------------
                                                                    101 Days
                                                    Year Ended         Ended
                                                   December 31,  December 31,
                                                          2006          2005
    -------------------------------------------------------------------------
    Weighted average trust units - basic            11,279,734     9,708,226
    Weighted average trust units - diluted          11,629,722     9,113,910
    Anti-dilutive trust unit options                   271,000        86,300
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Outstanding trust unit options are the only instruments that are currently
dilutive to earnings per unit.

                           Trust Unit Option Plan
                           ----------------------

    A summary of the changes in options outstanding under the Plan, with their
weighted average exercise prices, is as follows:

    -------------------------------------------------------------------------
                                                                    Weighted
                                                                     Average
                                                       Options      Exercise
                                                        (000's)        Price
    -------------------------------------------------------------------------
    Options outstanding at December 31, 2005               831    $    10.48
    Granted during period                                  301         22.51
    Exercised during the period                            (64)        10.05
    Expired                                               (108)        13.36
    -------------------------------------------------------------------------
    Options outstanding at December 31, 2006               960    $    13.95
    -------------------------------------------------------------------------
    Exercisable, at December 31, 2006                      689    $    10.49
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Trust recorded unit-based compensation expense and contributed surplus
of $440,000 for the estimated cost associated with the option plan for the
year ended December 31, 2006 (2005 - $138,000).

                                  Liquidity
                                  ---------

    -------------------------------------------------------------------------
                              As at December 31
    -------------------------------------------------------------------------
    (000's)                                             2006          2005
    -------------------------------------------------------------------------
    Total assets                                    $  211,405    $  133,998
    Current assets                                  $   35,533    $   34,735
    Current liabilities excluding current portion
     of long-term debt                              $   22,096    $   17,292
    Long-term debt (including current portion)      $   59,920    $      722
    Unitholders' equity                             $  129,389    $  115,984
    Working capital(1)                              $   13,437    $   17,443
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Notes:
    (1) Working capital refers to current assets less current liabilities,
        excluding the current portion of long-term debt. This is not a
        recognized measure under Canadian Generally Accepted Accounting
        Principles. Management believes that in addition to funds flow from
        operations, working capital is a useful supplemental measure as it
        provides an indication of the Trust's ability to meet its current
        debt obligations.

    The Trust's working capital ratio at December 31, 2006 was 1.61 (2005 -
2.01) (calculated as current assets divided by current liabilities excluding
current portion of long-term debt).

                               Long-term debt
    

    At December 31, 2006, the Trust had aggregate debt of $59.9 million
comprised of $283,000 of current portion of long-term debt and $59.6 million
of long-term debt.
    Of the total aggregate debt, term debt of $142,000 represents finance
contracts on specific equipment. This term debt is repayable in various
monthly installments and bears interest at a rate up to 8.8%, maturing between
2007 and 2008. Collateral for the term debt is specific equipment. Obligations
under capital leases equate to $264,000 and are repayable in monthly
installments including interest at rates from 6.9% to 9.2%. Collateral for the
capital leases is specific equipment. Monthly installments for the term debt
and capital leases total approximately $25,000 per month.
    Bonnett's Energy Services, L.P., an indirect wholly-owned subsidiary of
the Trust, has negotiated a credit facility with a major Canadian chartered
bank which provides for an extendible revolving operating credit facility of
$20.0 million with an extension to $25.0 million between the months of January
and May annually and an extendible revolving acquisition facility of $55.0
million (the "Credit Facilities"). The Credit Facilities are guaranteed by the
Trust, Bonnett's Holding Trust and Bonnett's Energy Services Ltd. and
collateral for the Credit Facilities are debentures from Bonnett's Energy
Services, L.P., and the guarantors providing security over all present and
after acquired personal property, and a floating charge over all real property
of such parties, as well as security under the Bank Act (Canada). The Credit
Facilities require no principal payments during the term and bear interest
which is payable monthly at varying rates that fluctuate based on the Trust's
funded debt to EBITDAC ratio. The revolving acquisition facility shall reduce
by $2.3 million at the end of each fiscal quarter, with the first reduction to
be effective September 30, 2007. The Credit Facilities are subject to an
annual review. If the Credit Facilities are not renewed at that time all
outstanding debt will become due 364 days from the review date. The fair value
of the fixed rate term debt is not materially different from its carrying
values.
    Amounts owing under the 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.
    All covenants of the Credit Facilities were satisfied at December 31,
2006. All banking requirements were up to date and the Trust does not
anticipate any covenant issues restricting the future operating, investing or
financing activities of Bonnett's Energy Services, L.P.

    
     Contractual Obligations and Contingencies - Payments Due by Period

    -------------------------------------------------------------------------
                           As at December 31, 2006
    -------------------------------------------------------------------------
                           Less than       1-3       4-5
    (000's)                   1 year     Years     Years  Thereafter   Total
    -------------------------------------------------------------------------
    Operating leases(1)     $  4,464   $ 5,685   $ 3,488   $     -   $13,637
    Long-term debt(2)            283       123         -         -       406
    -------------------------------------------------------------------------
                            $  4,747   $ 5,808   $ 3,488   $     -   $14,043
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Notes:
    (1) Operating leases are described under Note 11 to the December 31, 2006
        Financial Statements.
    (2) Long-term debt obligations are described under Note 6 to the
        December 31, 2006 Financial Statements.
    

    Included in lease commitments above is $1.2 million per year from 2007 to
2009, $1.1 million for 2010 and $700,000 for 2011 for the rental of land and
buildings to a company controlled by certain officers who are also directors
and unitholders of the Trust.
    The Trust is committed to future minimum payments for equipment under
construction of $8.9 million during 2007 with varying estimated in use dates.
    On October 26, 2006, the Trust was notified of a claim filed by one of
its competitors in the Court of Queen's Bench of Alberta alleging harm arising
from the Trust's hiring and competitive practices and seeking damages of
$250,000 plus costs, interest and punitive damages. Management's view is that
this claim is without merit and the Trust intends to defend the action. In the
opinion of the Trust, it is unlikely that the liabilities, if any, arising
from the legal proceedings and disputes will have a material adverse effect on
the consolidated financial position of the Trust or its operations.

    
                         Related party transactions
                         --------------------------
    

    During the year ended December 31, 2006, the Trust made payments in the
amount of $536,000 (2005 - $119,000) for the rental of land and buildings to a
company controlled by certain officers who are also directors and unitholders
of the Trust. At December 31, 2006 there is a payable in the amount of $31,000
in relation to the rental of land and buildings. In addition, the Trust made
payments of $276,000 (2005 - $46,000) for flight time to a company owned
partially by certain officers who are also directors and unitholders of the
Trust. These amounts are included in general and administrative expenses.
    These transactions were conducted in the normal course of operations, on
commercial terms established and agreed to by the related parties, and
therefore were recorded at the exchange amount. Prior to September 22, 2005,
Bonnett's Wireline Services Ltd. and The Testers Inc. rented land and
buildings from related parties. The Trust assumed the leases on these premises
to have minimal disturbance on day to day operations. Buildings that were
planned or were under construction by the related parties at September 22,
2005 were also assumed by the Trust when they were completed. All properties
and lease values were appraised by an independent third party prior to the
leases being accepted by the Trust. During the year the Trust expanded to 18
locations (2005 - 13) and for the first part of the year did not have an
aircraft for easy accessibility to them. The related parties made available an
aircraft for the exclusive use by the Trust for better access to all of its
locations. In the third quarter the Trust purchased an aircraft and will not
have payments in the future to related parties for aircraft usage.

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

    -------------------------------------------------------------------------
                                     Fiscal 2006               Fiscal 2005
                       ------------------------------------------------------
                          Three    Three    Three    Three    Three    Three
                         Months   Months   Months   Months   Months   Months
                          Ended    Ended    Ended    Ended    Ended    Ended
    (000's except per  December September    June    March December September
     unit amounts)           31       30       30       31       31       30
    -------------------------------------------------------------------------
    Revenue             $28,222  $29,684  $17,047  $38,729  $23,255  $ 1,595
    EBITDAC(1)          $ 3,494  $ 8,758  $   481  $16,099  $ 8,362  $   654
    Funds flow from
     operations(2)      $ 2,710  $ 8,275  $   175  $15,875  $ 7,556  $   645
    Funds flow from
     operations per
     unit
      Per Unit - Basic  $  0.24  $  0.74  $  0.02  $  1.42  $  0.83  $  0.08
      Per Unit - Fully
       diluted
                        $  0.23  $  0.71  $  0.01  $  1.37  $  0.82  $  0.08
    Net earnings
     (loss)             $ 1,075  $ 6,233  $(1,875) $11,125  $ 5,002  $   398
    Weighted average
     units
      Basic              11,477   11,246   11,246   11,147    9,154    8,302
      Diluted            11,718   11,657   11,724   11,559    9,190    8,533
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Notes:
    (1)  Refer to note (1) under the heading "Highlights".
    (2)  Refer to  note (2) under the heading "Highlights".
    

    The above information displays the cyclical nature of the Trust's
operations. Revenue, EBITDAC, and Net earnings are higher during the first and
fourth quarter of each year with a significant decline during the second
quarter with an improvement in the third quarter. The significant decline in
the second quarter is attributed to the annual spring break-up which is normal
and occurs at approximately the same time each year. The above trend also
displays the growth of the Trust since the commencement of operations. A
decrease of net earnings from the three months ended December 31, 2006 from
2005 indicates the Trust has incurred significant costs to complete this
growth with high expectations for the future. This decline is also due to
lower levels of drilling and completion activities from the previous year as
2005 was a record year for the services industry.

    
                           Fourth Quarter Analysis
                           -----------------------

    -------------------------------------------------------------------------
                                     Three Months Ended December 31
    -------------------------------------------------------------------------
    (000's except jobs
     completed data, and
     utilization rates)             2006        2005      Change           %
    -------------------------------------------------------------------------
    Revenue
      Wireline Services       $   19,953  $   16,470  $    3,483          21
      Testing Services             4,530       5,355        (825)        (15)
      Well Stimulation               940         768         172          22
      Fishing and Rentals          2,799         662       2,137         323
    -------------------------------------------------------------------------
                              $   28,222  $   23,255  $    4,967          21
    Operating costs               22,635      13,734       8,901          65
    -------------------------------------------------------------------------
    Gross margin              $    5,587  $    9,521  $   (3,934)        (41)
    -------------------------------------------------------------------------
    Gross margin as a
     percentage of revenue (%)        20          41           -         (21)
    -------------------------------------------------------------------------
    EBITDAC(1)                $    3,494  $    8,362  $   (4,868)        (58)
    Funds flow from
     operations(2)            $    2,710  $    7,556  $   (4,846)        (64)
    Funds flow from
     operations per unit(2)
      Per Unit - Basic        $     0.24  $     0.83  $    (0.59)        (71)
      Per Unit - Diluted      $     0.23  $     0.82  $    (0.59)        (72)
    Net earnings              $    1,075  $    5,002  $   (3,927)        (79)
    Earnings per unit
      Per Unit - Basic        $     0.09  $     0.55  $    (0.46)        (84)
      Per Unit - Diluted      $     0.09  $     0.54  $    (0.45)        (83)
    Distribution to unit
     holders                  $    5,169  $    2,778  $    2,391         (86)
      Distribution per unit
       - basic                $     0.45  $     0.30  $     0.15          50
    Weighted average units
      Basic                       11,477       9,154       2,323          25
      Diluted                     11,718       9,190       2,528          28

    -------------------------------------------------------------------------
    Revenue per job
     completed
      Wireline Services       $     5.87  $     5.45  $     0.42           8
      Testing Services              3.73        4.53       (0.80)        (18)
      Well Stimulation              5.63        8.63       (3.00)        (35)
      Fishing and Rentals           8.75        5.76        2.99          52
    -------------------------------------------------------------------------
    Weighted average          $     5.53  $     5.28  $     0.25           5
    -------------------------------------------------------------------------
    Jobs completed
     (number)(3)
      Wireline Services            3,402       3,020         382          13
      Testing Services             1,216       1,181          35           3
      Well Stimulation               167          89          78          88
      Fishing and Rentals            320         115         205         178
    -------------------------------------------------------------------------
                                   5,105       4,405         700          16
    -------------------------------------------------------------------------
    Utilization (%)(4)
      Wireline Services               57          84           -         (27)
      Testing Services                44          76           -         (32)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Notes:
    (1) Refer to note (1) under the heading "Highlights".
    (2) Refer to note (2) under the heading "Highlights".
    (3) Refer to note (3) under the heading "Highlights".
    (4) Utilization statistics are not maintained for the Well Stimulation
        and Fishing and Rentals divisions
    

    The financial results for the fourth quarter of 2006 were affected by the
Trust's continued capital expansion and the reduction in activity levels
compared to 2005.
    Revenue of $28.2 million was generated in the three months ended December
31, 2006, an increase of $4.9 million or 21% from the three months ended
December 31, 2005 of $23.3 million.
    Of this increase, $3.5 million relates to wireline services. The Trust
operated significantly more units in 2006 than in 2005. In addition, revenue
per job increased slightly. Utilization rates decreased by 27% in this quarter
from the same quarter in 2005. Electric line services, which are more
dependent on new well completions, were affected to a greater extent than
slickline services in the fourth quarter of 2006.
    A decrease was seen in the testing services division of $825,000.
Equipment used for testing is very easily portable. Oil and gas producers have
decreased activity in the shallower areas which is typically in the central
and southern areas of Alberta. As such, many competitors have saturated the
market in the northern part of Alberta due to the portability of testing
equipment. This has resulted in pricing pressure and lower utilization rates
for the testing services division. The average revenue per job decreased
significantly in the fourth quarter of 2006 from the same quarter in 2005.
    An increase of $172,000 for the well stimulation division is due to a
full quarter of operations. The acquisition of N2 Thousand Limited took place
on October 27, 2005. The decrease in the average revenue per job is due to a
change in the type of jobs performed during the quarter and pricing pressure
caused by the slowdown in activity.
    The increase of $2.1 million for fishing and rentals reflects a full
quarter of operations. The acquisition of Hess Oilfield Services Ltd. took
place on November 30, 2005. In addition, $8.1 million was spent on expansion
of the fishing and rentals division throughout the second half of 2006. The
increase in the average revenue per job was a result of the expansion of
fishing and pipe recovery services which are typically higher revenue jobs.

    
    -------------------------------------------------------------------------
                                    Three Months Ending December 31
    -------------------------------------------------------------------------
                                       2006                    2005
    -------------------------------------------------------------------------
                                                % of                    % of
         (000's)                       $     revenue           $     revenue
    -------------------------------------------------------------------------
    Wages and benefits        $   10,535          37  $    6,058          26
    Purchases for resale           2,661           9       1,821           8
    Equipment rental               1,510           5       1,321           6
    Repairs and maintenance        2,816          10       1,057           5
    Subcontract                      560           2         812           3
    Fuel                             981           4         701           3
    Travel and Meals               3,572          13       1,964           8
    -------------------------------------------------------------------------
    Operating costs           $   22,635          80  $   13,734          59
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Operating costs as a percentage of revenue increased by 21% from the
fourth quarter of 2005. Significant changes as a percentage of revenue were as
follows:
    -  Carrying costs, including wages and benefits relating to the
       fracturing and fishing and rentals divisions amount to $1.4 million or
       5% of revenue for the fourth quarter of 2006. The Trust expensed all
       operating costs relating to the expansions completed in 2006.
    -  Wages and benefits increased to 37% of revenue in the fourth quarter
       of 2006 from 26% in 2005. Wages and benefits for the above expansion
       amounted to $1.0 million or 4% of revenue. When expansion locations
       commence commercial operations, the Trust no longer considers costs as
       start up. The fishing and rentals division's new locations commenced
       operations during the fourth quarter of 2006, however, the revenue was
       below normal and as such wage costs increased as a percentage of
       revenue. Due to the labour shortage in Alberta the Trust has also
       introduced incentive plans such as a unit purchase plan and larger
       compensation packages to retain and attract qualified employees.
    -  Repairs and maintenance increased from the fourth quarter of 2005 to
       10% of revenue from 5%. The Trust incurred a large amount of setup
       costs for the above noted expanded locations, which did not qualify
       for capitalization under the Trust's policies. The Trust does not
       capitalize individual items or charges under $500. The costs which did
       not qualify because of this were expensed under repairs and
       maintenance. The Trust currently operates a newer fleet of equipment
       and does not anticipate large repairs and maintenance costs in the
       near future.
    -  Other costs increased by 5% of revenue for the quarter. These costs
       related to travel, rent, communications, safety and advertising and
       promotion. Some of these costs do not fluctuate in proportion with
       revenues. The Trust is currently reviewing all of these costs to
       create greater efficiencies and has made significant changes in the
       first quarter of 2007. The Trust has made significant progress
       bringing its acquisitions under one brand to build on the Bonnett's
       name and to improve the opportunity for cross marketing from division
       to division and to reduce costs.
    

    Revenue per job completed remained steady from the previous year with the
exception of fishing and rentals. Rentals expanded their services into pipe
recovery and fishing, which on average generates more revenue per job
completed than rentals alone.
    Utilization decreased 27% for wireline services and 32% for testing
services from the fourth quarter of 2005. Activity levels in the fourth
quarter of 2005 were significantly higher than normal while activity in the
fourth quarter of 2006 was lower than anticipated. This is reflective of the
market's perception of high natural gas inventory levels causing prices to
weaken and activity to decrease in Canada. The fourth quarter of 2006 was
warmer than normal increasing the length of road closures, thereby decreasing
the Trust's ability to generate revenue. The fourth quarter of 2005 was a
record setting quarter. Utilization rates were significantly higher for the
Trust's wireline services and testing services divisions. As discussed above,
the saturation of the northern market has driven down utilization for the
Trust's testing services division. In 2005 the wireline services division was
awaiting delivery of most of its equipment and was running skid units in
addition to full wireline units as demand was extremely high. In 2006 the
Trust saw a decline in new well completion work, and a steady amount of work
relating to production. 2005 was a record year for new well completions.

    
                           New Accounting Policies
                           -----------------------

    The Trust applies numerous accounting policies in preparing the
Consolidated Financial Statements. The Trust reviews its accounting policies
periodically to determine whether new accounting policies should be adopted
due to changes in how the Trust conducts its business or if new or amended
accounting standards are required by the Canadian Institute of Chartered
Accountants ("CICA"). The Trust was not required to incorporate new accounting
policies in fiscal 2006.

                        New Accounting Pronouncements
                        -----------------------------
    

    CICA Handbook Section 1530 - Comprehensive Income
    This standard will be effective for the Trust's 2007 reporting period and
is not expected to have a significant impact on the Trust. The standard
creates a separate financial statement that captures items included in other
comprehensive income but excluded from income in accordance with Canadian
GAAP.

    CICA Handbook Section 3855 and Section 3861 - Financial Instruments
    These standards will be effective for the Trust's 2007 reporting period
and are not expected to have a significant impact on the Trust. These
standards address the requirement to record financial instruments at fair
value in the financial statements unless certain criteria are met allowing
them to be recorded at cost or amortized cost.

    International Financial Reporting Standards
    Within the next five years, Canadian generally accepted accounting
principles for publicly accountable enterprises are expected to be replaced
with International Financial Reporting Standards ("IFRSs"). The CICA
anticipates a five-year transition period (ending around 2011). The Trust will
address the impact of the adoption of IFRSs as and when the transition
requirements become more clearly defined. It is possible that the adoption of
IFRS will have a material impact on the Trust's financial statements.

    
                        Critical accounting estimates
                        -----------------------------
    

    This Management's Discussion and Analysis of the Trust's financial
condition and results of operations is based on its consolidated financial
statements which are prepared in accordance with Canadian generally accepted
accounting principles. Note 2 of the Trust's audited consolidated financial
statements contain a description of the significant accounting policies.
During the preparation of the financial statements management is required to
make various estimates and judgments in determining the reported amounts of
assets and liabilities, revenues and expenses, as well as the disclosure of
commitments and contingencies. These estimates and judgments are based on
historical experience and various other assumptions that are believed to be
reasonable under the circumstances. Anticipating future events cannot be done
with certainty; therefore, these estimates may change as new events occur,
more experience is acquired and as the Trust's operating environment changes.
    The accounting estimates believed to require the most difficult,
subjective or complex judgments and which are material to the Trust's
financial reporting results are as follows:

    
                 Allowance for Doubtful Accounts Receivable
    

    The Trust evaluates its accounts receivable through a continuous process
of assessing its portfolio on an individual customer and on an overall basis.
This process consists of a thorough review of historical collection
experience, current aging status of customer accounts, financial condition of
the Trust's customers and other various factors. The Trust establishes
allowances for specific customers based on the review of these factors
utilizing a high degree of judgment and estimation. As such, the Trust's
actual results can significantly vary from those anticipated by management.

    
                       Impairment of Long-Lived Assets
    

    Carrying value of long-lived assets, which include property and equipment
and other assets, must be reviewed for impairment at least annually or
whenever events or changes in circumstances indicate that their carrying
amounts may not be recoverable. These long lived assets comprise a majority of
the Trust's assets. This requires the Trust to forecast future cash flows to
be derived from the utilization of these assets based on assumptions about
future industry conditions. Significant, unanticipated changes to these
assumptions could require an impairment provision in the future. As required
by accounting standards, the Trust tests its long-lived assets held for use
for impairment at least annually.

    
                             Goodwill Impairment
    

    Goodwill represents the excess of purchase price for business
acquisitions over the fair market value of the acquired businesses' net
assets. Goodwill is allocated as of the date of the business combination to
the Trust's operating divisions that are expected to benefit from the
synergies of the business acquisition. Goodwill is tested for impairment at
least annually.
    The impairment test is carried out in two steps. In the first step, the
carrying amount of the operating division is compared with its fair value.
When the fair value of the operating division exceeds its carrying amount,
goodwill of the operating division is considered not to be impaired and
performance of the second step of the impairment test is unnecessary. The
second step compares the implied fair value of the operating division's
goodwill with its carrying amount to measure the amount of the impairment
loss, if any.
    Assumptions utilized to determine the fair market value of each operating
division are estimated future unit earnings, utilization rates, sales prices,
operating expenditures and other costs as well as by various earnings
multiples. These estimates are subject to risk and uncertainties, and it is
possible that changes in estimates could occur which may effect the impairment
of goodwill.
    Based on management's estimates regarding the demand for the Trust's
services, the assumptions utilized to determine the future recoverability of
long-lived assets resulted in no indication that the carrying value of the
goodwill has been impaired.

    
                   Amortization of Property and Equipment
    

    Amortization is calculated using the straight-line method over the
estimated useful lives of the assets net of estimated residual value.
Management makes estimates and assumptions to determine the useful lives of
the assets, the estimated residual value and the appropriate method of
amortization. Factors that affect the estimated useful life of an asset
include expected future usage, effects of technological or commercial
obsolescence, expected wear and tear from use or the passage of time, the
effectiveness of the Trust's maintenance program and historical information of
similar items retired. Estimating useful lives and residual values becomes
more difficult the further items extend to the future.

    
                                Income Taxes
    

    The Trust follows the liability method to account for income taxes. Under
this method, future tax assets and liabilities are determined based on
differences between the carrying value and the tax basis of the assets and the
tax rates expected to in effect when the differences are expected to reverse.
Changes to these balances are recognized in net earnings in the period in
which they occur. The amount of any future income tax assets recognized is
limited to the amount that is more likely than not to be realized. Valuation
allowances are established to reduce future tax assets when it is more likely
than not that some portion or all of the assets will not be realized.
Estimates of future taxable income and the continuation of tax planning
arrangements have been considered in assessing the utilization of available
tax losses. Changes in circumstances and assumptions may require changes to
the valuation allowances with the Trust's future tax assets. Proposed
amendments to the trust tax legislation is discussed below in the "Outlook"
section.

    
                           Unit-Based Compensation
    

    Unit-based compensation expense associated with unit options at grant
date is estimated based on various assumptions using a modified Black-Scholes
methodology to produce an estimate of compensation. This estimate may vary due
to changes in the Black-Scholes variables, which include the risk free
interest rate of the Trust, the level of share price volatility and the rate
of forfeitures.

    
                           Risks and uncertainties
                           -----------------------
    

    The Trust's operations face a number of risks and uncertainties in the
normal course of business that may be beyond its control, but which could have
a material adverse effect on the Trust's financial condition, results of
operations or funds flows, and therefore possibly on the funds available for
distribution to Unitholders.

    
                           Seasonality and Weather
    

    In Canada, the level of activity in the oilfield services industry is
influenced by seasonal weather patterns. Spring break-up during the second
quarter leaves many secondary roads temporarily incapable of supporting the
weight of heavy equipment, which results in severe restrictions in the level
of oilfield services. The timing and duration of spring break-up are dependent
on regional weather patterns but generally occur in April and May.
Additionally, if an unseasonably warm winter prevents sufficient freezing, the
Trust may not be able to access certain well sites and its operating results
and financial condition may therefore be adversely affected.
    The demand for oilfield services may also be affected by the severity of
the Canadian winters. In addition, during excessively rainy periods, equipment
moves may be delayed, thereby adversely affecting operations. The volatility
in the weather and temperature can therefore create unpredictability in
activity and utilization rates. Activity and utilization levels of the
business units of the Trust generally lag the drilling industry by two to four
weeks.

    
                         Oil and Natural Gas Prices
    

    The demand, pricing and terms for oilfield services is largely dependent
upon the level of industry activity for Canadian natural gas and, to a lesser
extent, oil exploration and development. The level of activity in the Canadian
oil and gas exploration and production industry is volatile. No assurance can
be given that expected trends in oil and gas production activities will
continue or that demand for oilfield services will reflect the level of
activity in the industry. Any prolonged substantial reduction in oil and
natural gas prices would likely affect oil and gas production levels and
therefore affect the demand for services to oil and gas customers.

    
                       Access to Additional Financing
    

    The Trust has secured adequate financing facilities to meet its current
growth requirements; however it may find it necessary in the future to obtain
additional debt or equity financing to support ongoing operations, to
undertake capital expenditures or to complete business acquisitions. There can
be no assurance that additional financing will be available to the Trust when
needed or on terms acceptable to the Trust. Should the Trust not be able to
access additional financing to facilitate the Trust's growth, this could have
a material adverse impact on the Trust.

    
          Access to Equipment and Relationships with Key Suppliers
    

    Management maintains relationships with a number of key suppliers and
manufacturers in an attempt to mitigate risk. If the current suppliers and
manufacturers are not able to provide the necessary amount of materials or
complete the construction of equipment in a timely fashion, the ability to
provide services to the Trust's customers and expected future growth could
have a material adverse affect on our results of operations and our financial
condition.

    
                       Merger and Acquisition Activity
    

    Merger and acquisition activity in the oil and gas exploration and
production sector may impact demand for the Trust's services as customers
focus on reorganizing the business prior to committing funds to exploration
and development projects. Further, the acquiring company may have preferred
supplier relationships with oilfield service providers other than the Trust
and its operating divisions.

    
                         Dependence on Key Personnel
    

    The Trust's success depends to a significant extent on a number of its
key employees. The loss of the services of one or more of these employees
could have an adverse effect on the Trust.

    
                           Competitive Conditions
    

    The products and services that the Trust offers are highly competitive.
The Trust competes with several large national and multinational companies
that have greater financial resources than the Trust. There can be no
assurance that such competitors will not substantially increase the resources
devoted to the development and marketing of products and services that compete
with those of the Trust or that new competitors will not enter the various
markets in which the Trust is active. In certain aspects of its business, the
Trust also competes with a number of small and medium-sized companies, which,
like the Trust, have certain competitive advantages such as low overhead costs
and specialized regional strengths.

    
                           Workforce Availability
    

    The Trust's ability to provide reliable service is dependent upon
attracting and retaining skilled workers. The Trust attempts to overcome this
by offering an attractive compensation package and training to enhance skills
and career prospects.

    
                          Environmental Protection
    

    The Trust routinely deals with environmentally hazardous materials. The
Trust has designed programs to address compliance with current environmental
standards and monitors its practices concerning handling of environmentally
hazardous materials. There can be no assurance that the Trust's procedures
will prevent environmental damage occurring from spills of materials handled
by the Trust or that such damage has not already occurred. The Trust carries
insurance for such incidents but there can be no assurance that all incidents
will be covered by insurance. A partially or completely uninsured claim, if
successful and of sufficient magnitude, could have an adverse effect on the
Trust.
    The Trust's customers are subject to similar laws and regulations, as
well as limits on emissions into the air and discharges into surface and sub-
surface waters. Regulatory developments that may follow in subsequent years
could have the effect of reducing industry activity. We may be required to
increase operating expenses or capital expenditures in order to comply with
any new restrictions or regulations.

    
                               Operating Risks
    

    The Trust's activities involve certain operating hazards that can result
in personal injury or loss of life, damage and destruction of property and
equipment, damage to the surrounding areas, release of hazardous substances or
wastes and other damage to the environment, interruption or suspension of
operations and loss of revenues and future business. Whether or not the Trust
or its subcontractor causes an accident, the Trust could be named as a
defendant in lawsuits asserting large claims arising from such occurrences.
Although the Trust maintains insurance protection that it considers
economically prudent, there can be no assurance that any such insurance will
be sufficient or effective under all circumstances or against all claims or
hazards to which the Trust may be subject or that the Trust will be able to
continue to obtain such insurance protection. A successful claim or damage
resulting from a hazard for which the Trust is not fully insured could have a
material adverse effect on the Trust. Furthermore, no assurance can be given
that the Trust will be able to maintain adequate insurance in the future at
reasonable rates.

    
                            Financial Instruments
                            ---------------------

                          Credit and Concentration
    

    A concentration of credit risk on the Trust's trade accounts receivable
exists as they are virtually all derived from the oil and gas industry.
Overall significant long-term changes in the political, economic or
environmental conditions, as they relate to the oil and gas industry, could
adversely impact the Trust's ability to realize on its accounts receivable.
The Trust reduces risk through its credit granting policies and other
procedures designed to limit the exposure to credit risk. Except as disclosed
in the following paragraph, the Trust does not have a significant exposure to
any individual customer or other parties.
    The Trust's largest customer, a senior oil and gas company, represents
10% of revenue for 2006. In 2005 two of the Trust's largest customer
aggregated 23% of revenue. At December 31, 2006, the accounts receivable from
the Trust's largest customer amounted to 3% (2005 - 19%) of accounts
receivable.

    
                                Interest Rate
    

    The Trust's banking facilities have interest rates which float with the
prime rate, and as such, as these banking facilities are drawn, the Trust will
be exposed to higher interest costs if the prime rate should increase.

    
                     Disclosure Controls and Procedures
                     ----------------------------------
    

    Management has designed disclosure controls and procedures to provide
reasonable assurance that material information relating to the Trust, is made
known to the Chief Executive Officer and the Chief Financial Officer by others
within the Trust, particularly during the period in which the annual filings
of the Trust are being prepared, in an accurate and timely manner in order for
the Trust to comply with its disclosure and financial reporting obligations
and in order to safeguard assets. Management has concluded that the Trust's
disclosure controls and procedures, as of the end of the period covered by the
annual filings, are effective in providing reasonable assurance that material
information is accumulated and disclosed accurately. Consistent with the
concept of reasonable assurance, the Trust recognizes that the relative cost
of maintaining these controls and procedures should not exceed their expected
benefits. As such, the Trust's disclosure controls and procedures can only
provide reasonable assurance, and not absolute assurance, that the objectives
of such controls and procedures are met.

    
                 Internal Controls over Financial Reporting
                 ------------------------------------------
    

    The Chief Executive Officer and Chief Financial Officer of Bonnett's
Energy are responsible for designing internal controls over financial
reporting ("ICFRs") or causing them to be designed under their supervision in
order to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with Canadian GAAP. With the assistance of an independent third
party, the Trust has assessed the design of its internal control over
financial reporting as of December 31, 2006.
    During this process, management identified a certain material weakness in
internal controls over financial reporting which is as follows:

    
    -   Due to a limited number of staff, it was not possible for the Trust
        to setup a complex capital approved financial expenditure process.
        This was addressed in the third quarter of 2006, via the addition of
        qualified staff. The first implementation of this new process was
        applied to the 2007 budget year.

                                   Outlook
                                   -------

                         General industry conditions
    

    Concerns over natural gas inventory levels have caused prices to weaken
during the year. The result has been a decrease in activity levels in the year
and lower levels of activity are expected for 2007. Shallow areas of the WCSB
have and will see a significant decrease in activity in 2007. Activity levels
in deeper areas of the basin are expected to remain relatively steady despite
lower commodity prices. Programs for developing deeper areas are focused on
reserves with a much longer life and are generally not affected by short term
fluctuations in commodity prices.
    The Trust is primarily focused on deeper areas in the WCSB and is less
affected by short term commodity price concerns. Most of the Trust's full
service locations are located along the foothills of the Rocky Mountains which
are typically deeper gas areas.
    The Trust executed a large capital program in 2006, which has increased
capacity significantly. Most of this equipment was deployed prior to the
winter season of 2007. The benefits of this expansion should be reflected in
the financial results of 2007.
    In the first quarter of 2007, the Trust has strengthened its brand by
consolidating the wireline acquisitions completed since inception under the
name "Bonnett's Foothills". This will enable the Trust to capitalize on the
cross marketing for its various divisions. Hand in hand with branding, the
Trust is focusing on managing efficiently by ensuring the right people are in
the right roles. In addition, the Trust has been reviewing its cost structure
and has embarked on a cost savings program designed to allow the Trust to
operate profitably during slower periods of activity.
    The management team has been through oil and gas cycles and anticipates a
return to high activity levels before 2007 is done.

    
                Proposed Amendments to Trust Tax Legislation
    

    The federal government has recently announced a "Tax Fairness Plan for
Canadians." The proposed plan intends to restore balance to the federal tax
system by creating an equal playing field for income trusts and corporations.
For the Trust these proposed changes would not come into effect until 2011.
    The new proposed rules include changes to the taxation of funds paid out
of the Trust to unitholders. Effective January 1, 2011, the Trust will be
required to pay tax at a rate of 31.5% on amounts distributed to unitholders.
The net distribution paid to unitholders will then be taxed similar to a
dividend from a Canadian public corporation.

    
                           Additional Information
    

    Additional information relating to Bonnett's Energy Services 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, 2007. 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.

    Bonnett's Energy Services Trust
    Consolidated Financial Statements
    For the Year Ended December 31, 2006

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

                                                   December 31,  December 31,
                                                          2006          2005
    -------------------------------------------------------------------------
    Assets

    Current assets
      Cash and cash equivalents                     $    2,667    $    6,028
      Accounts receivable                               29,483        27,288
      Inventory                                          2,076           725
      Prepaid expenses and deposits                      1,307           694
    -------------------------------------------------------------------------
                                                        35,533        34,735

    Property and equipment (Note 4)                    118,681        55,150
    Intangible assets (Note 5)                           8,859         7,849
    Future income tax assets (Note 9)                    1,574           953
    Goodwill (Note 5)                                   46,758        35,311
    -------------------------------------------------------------------------
                                                    $  211,405    $  133,998
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Unitholders' Equity

    Current liabilities

      Accounts payable and accrued liabilities      $   20,372    $   15,473
      Distributions payable (Note 8)                     1,724         1,069
      Income taxes payable (Note 9)                          -           750
      Current portion of long-term debt (Note 6)           283           302
    -------------------------------------------------------------------------
                                                        22,379        17,594

    Long-term debt (Note 6)                             59,637           420
    -------------------------------------------------------------------------
                                                        82,016        18,014
    -------------------------------------------------------------------------

    Unitholders' Equity
      Trust units (Note 7)                             129,597       113,445
      Contributed surplus (Note 7(e))                      512           138
      Retained earnings (deficit)                         (720)        2,401
    -------------------------------------------------------------------------
                                                       129,389       115,984
    -------------------------------------------------------------------------

                                                    $  211,405    $  133,998
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Contingencies and Commitments (Note 11)

    -------------------------------------------------------------------------
                                             Bonnett's Energy Services Trust
        Consolidated Statements of Operations and Retained Earnings (Deficit)
                               (dollars in thousands except per unit amounts)

                                                                     101 Day
                                                    Year Ended  Period Ended
                                                   December 31,  December 31,
                                                          2006          2005
                                                                    (Note 15)
    -------------------------------------------------------------------------

    Revenue                                         $  113,682    $   24,850
    -------------------------------------------------------------------------

    Expenses
      Operating costs                                   78,356        14,634
      General and administrative                         6,494         1,200
      Amortization of property and equipment             6,885         1,073
      Amortization of intangible assets                  3,308           535
      Interest - current                                   237             -
      Interest on long-term debt                         1,496            65
      Unit-based compensation                              440           138
      Deferred finance costs                               167            21
    -------------------------------------------------------------------------
                                                        97,383        17,666
    -------------------------------------------------------------------------

    Income before other items                           16,299         7,184
      Loss on sale of fixed assets                         280            65

    -------------------------------------------------------------------------
    Income from operations before income taxes          16,019         7,119
    -------------------------------------------------------------------------

    Income tax expense (recovery) (Note 9)
      Current                                               64           750
      Future                                              (603)          969
    -------------------------------------------------------------------------
                                                          (539)        1,719
    -------------------------------------------------------------------------

    Net income for the period                           16,558         5,400

    Retained earnings, beginning of period               2,401             -
    Distributions (Note 8)                             (19,679)       (2,999)
    -------------------------------------------------------------------------
    Retained earnings (deficit), end of period      $     (720)   $    2,401

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per unit - basic (Note 7 (d))          $     1.47    $     0.60
    Earnings per unit - diluted (Note 7 (d))        $     1.42    $     0.59

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
                                             Bonnett's Energy Services Trust
                                       Consolidated Statements of Cash Flows
                                                       (thousands of dollars)

                                                                     101 Day
                                                    Year Ended  Period Ended
                                                   December 31,  December 31,
                                                          2006          2005
                                                                    (Note 15)
    -------------------------------------------------------------------------
    Cash flows from operating activities
      Net income for the period                     $   16,558    $    5,400
      Items not involving cash:
        Amortization of property and equipment           6,885         1,073
        Amortization of intangible assets                3,308           535
        Deferred finance costs                             167            21
        Future income tax expense (recovery)              (603)          969
        Loss on sale of fixed assets                       280            65
        Unit-based compensation                            440           138
    -------------------------------------------------------------------------
        Funds flow from Operations                      27,035         8,201

      Net change in non-cash working capital
       items (Note 10 (a))                              (6,191)      (12,359)
    -------------------------------------------------------------------------
      Cash flow from operations, including changes
       in non-cash working capital items                20,844        (4,158)
    -------------------------------------------------------------------------

    Cash flows from financing activities
    -------------------------------------------------------------------------
      Monthly distributions paid                       (19,023)       (1,930)
      Advances on long term debt net of repayment       59,199        (5,022)
      Issue of Trust units for cash                        639        74,228
      Trust unit issue costs                               (42)       (4,928)
    -------------------------------------------------------------------------
                                                        40,773        62,348
    -------------------------------------------------------------------------

    Cash flows from investing activities
      Acquisition of Independent Wireline Inc.
       (Note 3)                                        (10,587)            -
      Acquisition of Silverline Swabbing Ltd and
       1078336 Alberta Ltd. (Note 3)                    (1,709)            -
      Acquisition of Bonnett's Wireline Ltd
       and the Testers Inc.                                  -       (29,584)
      Acquisition of N2 Thousand Limited &
       Platinum Stimulation Services Ltd.                    -        (3,956)
      Acquisition of Hess Oilfield Services Ltd.             -        (5,074)
      Proceeds on disposal of property, equipment
       and other assets                                    528            10
      Purchase of equipment and other assets           (58,808)      (13,332)
      Changes in non-cash investing working capital
       (Note 10 (b))                                     5,598    $     (226)
    -------------------------------------------------------------------------
                                                    $  (64,978)   $  (52,162)
    -------------------------------------------------------------------------

      Increase (decrease) in cash and cash
       equivalents                                  $   (3,361)   $    6,028
    -------------------------------------------------------------------------

      Cash and cash equivalents at
       beginning of period                          $    6,028    $        -
    -------------------------------------------------------------------------

      Cash and cash equivalents end of period            2,667         6,028
    -------------------------------------------------------------------------
    Supplementary cash flow information
      Income taxes paid                             $      814    $        -
      Interest paid                                 $    1,637    $       65
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The accompanying notes are an intergral part of these consolidated
financial statements.

    Bonnetts's Energy Services Trust
    Notes to the Consolidated Financial Statements
    As at and for the Year Ended December 31, 2006
    (dollars in thousancds except per unit amounts)

    1.  Nature of the Organization

        Bonnett's Energy Services Trust (the "Trust" or "Bonnett's Energy")
        is an open-end unincorporated investment trust governed by the laws
        of the Province of Alberta and created pursuant to a Trust Indenture
        dated August 12, 2005. The Trust commenced operations on
        September 22, 2005. The principal undertaking of the Trust is to
        engage in the oilfield services business through its indirect wholly-
        owned subsidiary, Bonnett's Energy Services, L.P. (the
        "Partnership").

        On September 22, 2005, the Trust completed an initial public offering
        ("IPO") whereby 4,500,000 Trust units were issued at $10 per Trust
        unit for gross proceeds of $45,000. On September 22, 2005, 3,679,583
        Trust units were issued on a private placement basis for the
        acquisition of certain net assets of Bonnett's Wireline Services Ltd.
        and The Testers Inc.

        The beneficiaries of the Trust are the holders of Trust units. The
        Trust intends to make monthly distributions to Unitholders of record
        on the last business day of each calendar month.

    2.  Summary of Significant Accounting Policies

        a) Basis of presentation and use of estimates

        The financial statements of the Trust have been prepared by
        management in accordance with Canadian generally accepted accounting
        principles (GAAP). Because a precise determination of many assets and
        liabilities is dependent upon future events, the preparation of
        financial statements necessarily involve the use of estimates and
        approximations based on information available as of the date of the
        disclosure of assets and liabilities and revenues and expenses for
        the period reported. The most significant of these are the estimates
        used for amortization, goodwill and intangibles, annual impairment
        and unit-based compensation. Accordingly, actual results could differ
        from those estimates. The financial statements have, in management's
        opinion, been properly prepared within reasonable limits of
        materiality and within the framework of the Trust's accounting
        policies summarized below.

        b) Principles of consolidation

        These consolidated financial statements include the accounts of
        Bonnett's Holding Trust, Bonnett's Holding Corp., Bonnett's Energy
        Services Ltd. (the general partner) and Bonnett's Energy Services,
        L.P. (the Partnership). All significant inter-company transactions
        and balances have been eliminated upon consolidation.

        c) Cash and cash equivalents

        Cash and cash equivalents consist of cash on deposit and short-term
        interest bearing securities with maturities less than three months.

        d) Inventory and prepaid supplies

        Inventory of raw materials and other supplies included in other
        current assets are stated at the lower of cost, determined on an
        average cost basis and replacement value.

        e) Property and equipment

        Property and equipment is recorded at cost less accumulated
        amortization. Amortization is provided using the straight-line method
        over the estimated useful lives of the assets (net of estimated
        residual value):

                 Field services equipment                  5-15 years
                 Aircraft                                    20 years
                 Communications and computer equipment      3-5 years
                 Buildings and improvements                  10 years
                 Equipment under construction           Not amortized

        f) Goodwill and intangibles

        Goodwill represents the excess of the purchase price of acquired
        businesses over the fair value of net tangible and identifiable
        intangible assets acquired and is not subject to amortization.

        Intangibles with a limited life are amortized using the straight line
        method over their expected useful lives between two and five years.

        Goodwill is tested for impairment at least annually to determine if
        events or circumstances indicate the goodwill might be impaired. The
        impairment test includes the application of a fair value test, with
        an impairment loss recognized when the carrying value of goodwill
        exceeds its estimated fair value. Impairment provisions are not
        reversed if there is a subsequent increase in the fair value of the
        goodwill.

        Intangibles with a limited life are tested for impairment when events
        and circumstances are deemed to have caused a permanent decrease in
        value.

        g) Revenue recognition

        Revenue for oilfield services is recognized in the period that the
        services are provided to customers. Revenue on parts is recognized
        when the product is shipped and ownership passes to the customer.

        h) Segmented information

        Bonnett's Energy views its operations as a single business segment
        due to the integration of the operations, common customer bases,
        geographic concentration in the Western Canadian Sedimentary Basin,
        and the single focus on the oilfield services sector.

        i) Income tax

        The Trust follows the liability method to account for income taxes.
        Under this method, future tax assets and liabilities are determined
        based on differences between the carrying value and the tax basis of
        the assets and the tax rates expected to be in effect when the
        differences are expected to reverse. Changes to these balances are
        recognized in net earnings in the period in which they occur. The
        amount of any future income tax assets recognized is limited to the
        amount that is more likely than not to be realized.

        The Trust is a taxable entity under the Canadian Income Tax Act and
        is taxable only on income that is not distributed or distributable to
        the Unitholders.

        j) Deferred financing costs

        Costs associated with the establishment of long-term debt
        arrangements are deferred and amortized using the straight-line
        method over the term of the debt. Such costs are included in other
        assets.

        k) Unit-based compensation

        The Trust has established a Performance Unit Incentive Plan (the
        "Plan") for employees and directors of the Trust or its subsidiary.
        The Trust uses the fair value method for valuing unit based
        compensation and unit option grants. Under this method, compensation
        cost attributed to performance units granted is measured at the fair
        value at the grant date and expensed over the vesting period with a
        corresponding increase to contributed surplus. Upon the settlement of
        the Plan, the previously recognized value in contributed surplus will
        be recorded as an increase to unitholders' capital. The Trust has not
        incorporated an estimated forfeiture rate for performance units that
        will not vest, rather, the Trust accounts for actual forfeitures as
        they occur.

        l) Earnings per unit

        Per unit information is calculated on the basis of the weighted
        average number of trust units outstanding during the fiscal year.
        Diluted per unit information includes the impact of the issuable
        exchangeable shares, as well as, the potential dilution that could
        occur if securities or other contracts to issue units were exercised
        or converted to units. Diluted per unit information is calculated
        using the treasury stock method that assumes any proceeds received by
        the Trust upon the exercise of in-the-money unit options plus the
        unamortized unit compensation cost would be used to buy back trust
        units at the average market price for the period.

        m) Financial instruments

        The net carrying value of accounts receivable, approximates fair
        value due to the short-term nature of these instruments. The Trust
        has a large number of diverse customers, which minimizes overall
        accounts receivable credit risk.

        The carrying value of accounts payable and accrued liabilities and
        distributions payable approximates the fair value of these financial
        instruments due to their short-term nature. The carrying value of
        bank debt approximates its carrying value as it is at industry
        standard terms. The carrying values of certain term debt may differ
        from their fair values due to the fixed interest rate applied and the
        long repayment terms of these term loans. (See note 6 for a detailed
        description of the term debt.)

        n) Lease obligations

        Leases are classified as capital or operating leases. A lease that
        transfers substantially all of the benefits and risks incidental to
        the ownership of property is classified as a capital lease. At the
        inception of a capital lease, an asset and an obligation are recorded
        at an amount equal to the lesser of the present value of the minimum
        lease payments and the property's fair value at the beginning of the
        lease. All other leases are accounted for as operating leases wherein
        payments are expenses as incurred.

        o) Employee benefit plans

        The Trust offers its employees the option to participate in a defined
        contribution retirement plan as well as an employee unit purchase
        plan.

        Employer contributions to the defined contribution plan and the
        employee unit purchase plan are expensed as employees earn the
        entitlement and contributions are made.

    3.  Business Acquisitions

        On January 16, 2006, Bonnett's Energy completed the acquisition of
        substantially all the assets of an oilfield service company for an
        aggregate purchase price of $22,111 (including acquisition costs).
        The purchase price was funded by the payments of $10,587 in cash and
        the issuance by the Trust of an aggregate of 559,403 Trust units at
        the five day weighted average trading price of $20.60 per unit.

                                                                 Independent
                                                                Wireline Inc.
        ---------------------------------------------------------------------
        Net assets acquired
        ---------------------------------------------------------------------
          Current assets                                     $           423
          Property and equipment                                       9,699
          Intangible assets                                            3,388
          Goodwill                                                     8,601
        ---------------------------------------------------------------------
                                                             $        22,111
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Consideration
        ---------------------------------------------------------------------
          Cash                                               $        10,490
          Acquisition costs                                               97
          Trust units (559,403 units)                                 11,524
        ---------------------------------------------------------------------
                                                             $        22,111
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        On October 2, 2006, Bonnett's Energy completed the acquisition of
        substantially all the assets of Silverline Swabbing Ltd. and a
        related company, for an aggregate purchase price of $5,656 (including
        acquisition costs). The purchase price was funded by the payments of
        $1,709 in cash and the issuance by the Trust of an aggregate of
        182,815 Trust units at the five day weighted average trading price of
        $21.59 per unit.

                                                    Silverline Swabbing Ltd.
                                                    and 1078336 Alberta Ltd.
        ---------------------------------------------------------------------
        Net assets acquired
        ---------------------------------------------------------------------
          Current assets                                     $           150
          Property and equipment                                       2,730
          Intangible assets                                              930
          Goodwill                                                     1,846
        ---------------------------------------------------------------------
                                                             $         5,656
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Consideration
        ---------------------------------------------------------------------
          Cash                                               $         1,630
          Acquisition costs                                               79
          Trust units (182,815 units)                                  3,947
        ---------------------------------------------------------------------
                                                             $         5,656
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        On November 30, 2005, Bonnett's Energy completed the acquisition of
        substantially all the assets of Hess Oilfield Services Ltd for an
        aggregate purchase price of $8,821 and a commitment to pay an
        additional $1,000 if a certain earnings target was achieved by the
        acquired business within the first year of fiscal operations. A
        $1,000 liability was recorded by the Trust on December 1, 2006 as a
        result of the acquired business achieving the earnings target. This
        amount has been recorded as additional goodwill.

    4.  Property and Equipment

                                                   As at December 31, 2006
        ---------------------------------------------------------------------
                                                           Accum-
                                                           ulated
                                                          Amorti-   Net Book
                                                  Cost     zation      Value
        ---------------------------------------------------------------------

        Field services equipment             $ 105,016  $   6,943  $  98,073
        Communication and computer equipment     4,264        841      3,423
        Buildings and improvements                 568         40        528
        Aircraft                                 3,231         54      3,177
        Equipment under construction            13,480          -     13,480
        ---------------------------------------------------------------------
                                             $ 126,559  $   7,878  $ 118,681
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


                                                   As at December 31, 2005
        ---------------------------------------------------------------------
                                                           Accum-
                                                           ulated
                                                          Amorti-   Net Book
                                                  Cost     zation      Value
        ---------------------------------------------------------------------
        Field services equipment             $  49,137  $     960  $  48,177
        Communication and computer equipment     2,338        109      2,229
        Buildings and improvements                 177          4        173
        Aircraft                                     -          -          -
        Equipment under construction             4,571          -      4,571
        ---------------------------------------------------------------------
                                             $  56,223  $   1,073  $  55,150
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        Included above in field services equipment are capital leases with a
        cost of $1,131 (December 31, 2005 - $1,131) and a carrying value of
        $1,054 (December 31, 2005 - $1,115). Equipment under construction of
        $13,480 (December 31, 2005 - $4,571) was not amortized.

    5.  Intangible assets and Goodwill

        a) Intangible assets

                                                   As at December 31, 2006
        ---------------------------------------------------------------------
                                                           Accum-
                                                           ulated
                                                          Amorti-   Net Book
                                                  Cost     zation      Value
        ---------------------------------------------------------------------
        Customer lists                       $   7,138  $   1,700  $   5,438
        Employees and contractors                4,787      1,993      2,794
        Non - compete agreements                   640        104        536
        Permits and licenses                       137         46         91
        ---------------------------------------------------------------------
                                             $  12,702  $   3,843  $   8,859
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


                                                   As at December 31, 2005
        ---------------------------------------------------------------------
                                                           Accum-
                                                           ulated
                                                          Amorti-   Net Book
                                                  Cost     zation      Value
        ---------------------------------------------------------------------
        Customer lists                       $   6,006  $     297  $   5,709
        Employees and contractors                2,249        229      2,020
        Non - compete agreements                     -          -          -
        Permits and licenses                       129          9        120
        ---------------------------------------------------------------------
                                             $   8,384  $     535  $   7,849
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        b) Goodwill

        At December 31, 2006 the Trust is carrying $46,758 (2005 - $35,311)
        in goodwill from business acquisitions completed in 2005 and 2006.
        The Trust tested for impairment through applying a two-step process.
        Assumptions utilized to determine the fair market value of each
        operating division are estimated future by unit earnings, utilization
        rates, sales prices, operating expenditures and other costs as well
        as various earnings multiples. These estimates are subject to risk
        and uncertainties, and it is possible that changes in estimates could
        occur which may effect the impairment of goodwill.

        Based on management's estimates regarding the continuance of demand
        for the Trust's services, the assumptions utilized to determine the
        future recoverability of goodwill resulted in no indication that the
        carrying value of goodwill has been impaired.

    6.  Long-Term Debt

                                                         As at         As at
                                                   December 31,  December 31,
                                                          2006          2005
        ---------------------------------------------------------------------
            Bank debt                               $   59,514    $        -
            Term debt                                      142           249
            Obligations under capital leases               264           473
        ---------------------------------------------------------------------
                                                        59,920           722

            Current portion of long-term debt             (283)         (302)
        ---------------------------------------------------------------------
            Long-term debt                          $   59,637    $      420
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Bank debt consists of an extendible revolving acquisition facility of
        up to $55,000 and an extendible revolving operating facility of up to
        $20,000, with a seasonal increase to $25,000 from January 1st to
        May 30th of each year. These facilities require no principal payments
        during the term and bear interest at varying rates that fluctuate
        with the prime rate. The revolving acquisition facility shall reduce
        by $2,750 at the end of each fiscal quarter, with the first reduction
        to be effective September 30, 2007. The facility is subject to an
        annual review on April 30 of each year. If the facility is not
        renewed at that time, all outstanding debt will become due April 29,
        2008.

        All covenants of the Credit Facilities were satisfied at December 31,
        2006. Collateral for the facility is a general assignment of book
        debts and a general security agreement over all assets of the Trust.

        The term debt is repayable in various monthly installments from $0.7
        to $1.2 per month including interest at a rate up to 8.8%, maturing
        between 2007 and 2008. Collateral for the term debt is specific
        equipment, with a carrying value of $330.

        The obligations under capital leases are repayable in monthly
        installments from $1.8 to $6.8 including interest at a rate from 6.9%
        to 9.2%. Collateral for the capital leases is specific equipment with
        a carrying value of $1,054.

        The estimated payments due in each of the next five years excluding
        imputed interest on term debt and obligations under capital leases
        are as follows:

                          2007                 $     283
                          2008                       123
                          2009                         -
                          Thereafter                   -
                       ----------------------------------
                                               $     406
                       ----------------------------------
                       ----------------------------------

        The fair value of the fixed rate term debt is not materially
        different from its carrying values.

    7.  Unitholders' Equity

        a) Authorized

        Bonnett's Energy is authorized to issue an unlimited number of Trust
        units and an unlimited number of special voting rights. Special
        Voting Rights enable the Trust to provide voting rights to holders of
        exchangeable shares that may be issued by subsidiaries of the Trust
        in connection with exchangeable share transactions. The Special
        Voting Rights shall not confer upon the holders thereof any other
        rights.

        b) Issued and outstanding
                                                     Thousands
                                                      of Units        Amount
        ---------------------------------------------------------------------
           Trust units issued pursuant to
            Initial Public Offering                      4,500    $   45,000
           Trust units issued as consideration
            for acquired businesses                      4,049        42,223
           Trust units issued on private placements      2,137        29,228
           Trust units issue costs, net of future
            tax benefit of $1,922                            -        (3,006)
        ---------------------------------------------------------------------
           Trust units at December 31, 2005             10,686    $  113,445
           Trust units issued as consideration for
            the acquired business (Note 3)                 742        15,471
           Trust units issued upon the exercise
            of unit options                                 64           706
           Trust unit issue costs, net of future
            tax benefit of $17                               -           (25)
        ---------------------------------------------------------------------
           Trust units at December 31, 2006             11,492    $  129,597
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        c) Trust unit option plan

        The Trust maintains an Employee, Director, Officer and Consultant
        Trust unit option plan under which the Trust may grant options up to
        10% of the outstanding trust units at an exercise price equal to the
        five day weighted average trading price. All options awarded are
        exercisable for a period of four years and vest one-third per year
        over three years commencing on the first anniversary date of the
        grant.

        A summary of the changes in outstanding options under the plan, with
        their weighted average exercise prices, are as follows:

                                                           December 31, 2005
                        Year Ended December 31, 2006    101 Day Period Ended
                                                                    (Note 15)
        ---------------------------------------------------------------------
                                 Options    Weighted     Options    Weighted
                             Outstanding     Average Outstanding     Average
                                      in    Exercise          in    Exercise
                               Thousands       Price   Thousands       Price
        ---------------------------------------------------------------------
        Outstanding -
         beginning of period         831    $  10.48           -    $      -
        Granted at initial IPO         -           -         791       10.00
        Granted during the period    301       22.51          86       14.62
        Exercised during
         the period                  (64)      10.05           -           -
        Expired                     (108)      13.36         (46)      10.00
        ---------------------------------------------------------------------
        Outstanding, end of
         period                      960    $  13.95         831    $  10.48
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Exercisable, end of
         period                      689    $  10.49           -    $      -
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The fair value of options issued during the period was estimated
        using a modified Black Scholes pricing model with the following
        assumptions: risk-free interest rate between 3.4% and 4.2%, annual
        distribution rate between 6.5% and 12.0%, volatility between 35% and
        47% and life of 4 years. The weighted average fair value of the
        options issued in 2006 is $22.94 (2005 - $14.62).

        d) Per Trust unit Information

        Diluted average number of Trust units outstanding is calculated using
        the treasury stock method. The amounts outstanding are as follows:

                                                                     101 Day
                                                    Year Ended  Period Ended
                                                   December 31,  December 31,
                                                          2006          2005
                                                                    (Note 15)
        ---------------------------------------------------------------------
        Weighted average units - basic              11,279,734     9,078,226
        Weighted average units - diluted            11,629,722     9,113,910
        ---------------------------------------------------------------------
        Anti-dilutive unit options                     271,100        86,300
        ---------------------------------------------------------------------

        Outstanding Trust unit options are the only instruments that are
        currently dilutive to earnings per unit.

        e) Contributed Surplus

                                                                     101 Day
                                                    Year Ended  Period Ended
                                                   December 31,  December 31,
                                                          2006          2005
                                                                    (Note 15)
        ---------------------------------------------------------------------
        Balance at beginning of period              $      138    $        -
        Unit based compensation expense                    440           138
        Fair value of trust unit options exercised         (66)            -
        ---------------------------------------------------------------------
        Balance at end of period                    $      512    $      138
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


    8.  Cash Distributions

        The Trust declares monthly distributions of cash to Unitholders of
        record as at the close of business on each Distribution Record Date.
        Pursuant to its policy, the Trust intends to pay distributions on
        each unit to its Unitholders subject to satisfying its financial
        covenants. Such distributions are recorded as reductions of equity
        upon declaration of the distribution. During the period, the Trust
        paid distributions to the Unitholders in accordance with the
        following schedule:

    2006
    -------------------------------------------------------------------------
                                                        Cash Distributions
                                                     ------------------------
    Distribution    Distributions       Date of
    Period, 2006    Record Date         Distribution      Per Unit     Total
    -------------------------------------------------------------------------
    January 1 to
     January 31     January 31, 2006    February 15, 2006   $ 0.12  $  1,350
    February 1 to
     February 28    February 28, 2006   March 15, 2006      $ 0.12     1,350
    March 1 to
     March 31       March 31, 2006      April 14, 2006      $ 0.15     1,686
    April 1 to
     April 30       April 30, 2006      May 15, 2006        $ 0.15     1,686
    May 1 to
     May 31         May 31, 2006        June 15, 2006       $ 0.15     1,687
    June 1 to
     June 30        June 30, 2006       July 17, 2006       $ 0.15     1,687
    July 1 to
     July 31        July 31, 2006       August 15, 2006     $ 0.15     1,687
    August 1 to
     August 31      August 31, 2006     September 15, 2006  $ 0.15     1,688
    September 1 to
     September 30   September 30, 2006  October 13, 2006    $ 0.15     1,689
    October 1 to
     October 31     October 31, 2006    November 15, 2006   $ 0.15     1,722
    November 1 to
     November 30    November 30, 2006   December 15, 2006   $ 0.15     1,723
    December 1 to
     December 31    December 31, 2006   January 15, 2007    $ 0.15     1,724
    -------------------------------------------------------------------------
    Total distributions during year                                 $ 19,679
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    2005
    -------------------------------------------------------------------------
                                                        Cash Distributions
                                                     ------------------------
    Distribution   Distributions       Date of
    Period, 2005   Record Date         Distribution       Per Unit     Total
    -------------------------------------------------------------------------
    September 22
     to
     September 30  September 30, 2005  October 14, 2005   $ 0.0267  $    221
    October 1 to
     October 31    October 31, 2005    November 15, 2005  $ 0.1000       842
    November 1 to
     November 30   November 30, 2005   December 15, 2005  $ 0.1000       867
    December 1 to
     December 31   December 31, 2005   January 15, 2006   $ 0.1000     1,069
    -------------------------------------------------------------------------
    Total distributions during period                               $  2,999
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    9.  Income Taxes

        a) The tax effects that give rise to significant portions of the
           future income tax assets and liabilities are presented below:

                                                         As at         As at
                                                   December 31,  December 31,
                                                          2006          2005
           ------------------------------------------------------------------
           Future income tax assets:
             Non-current
               Deferred financing costs             $       53    $        3
               Trust unit issue costs                    1,389         1,773
               Property and equipment                      549             -
           ------------------------------------------------------------------
           Total non-current future income
            tax assets                              $    1,991    $    1,776
           ------------------------------------------------------------------
           Future income tax liabilities:
             Non-current
               Property and equipment               $        -    $      684
               Intangible assets                           417           139
           ------------------------------------------------------------------
           Total non-current future income
            tax liabilities                         $      417    $      823
           ------------------------------------------------------------------
           Net future income tax asset              $    1,574    $      953
           ------------------------------------------------------------------
           ------------------------------------------------------------------

        In assessing whether the future tax assets are realizable, management
        considers whether it is more likely than not that some portion or all
        the future tax assets will not be realized. The ultimate realization
        of future tax assets is dependent upon the generation of future
        taxable income during the periods in which those temporary
        differences become deductible. Based upon projections for future
        taxable income, management believes it is more likely than not that
        the Trust will realize the benefits of these deductible differences.
        The amount of the future tax asset considered realizable, however,
        could be reduced in the near term if estimates of future taxable
        income during the carry-forward period are reduced.

        b) Actual income tax expense differs from the "expected" income tax
           expense that would have been computed by applying the statutory
           income tax rates as follows:

                                                                     101 Day
                                                    Year Ended  Period Ended
                                                   December 31,  December 31,
                                                          2006          2005
                                                                    (Note 15)
    -------------------------------------------------------------------------
    Federal and provincial statutory income
     tax rates                                             39%           39%
    Income before income taxes                      $   16,019    $    7,119
    -------------------------------------------------------------------------
    Expected income tax provision                        6,247         2,776
    Unit based compensation                                172            54
    Distributions from the Trust                        (7,674)       (1,170)
    Non deductible amortization on
     intangible assets                                     375             -
    Current tax expense                                     64             -
    Other                                                  277            59
    -------------------------------------------------------------------------
    Actual income tax expense                       $     (539)   $    1,719
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        c) Available ending tax pools are as follows:

                                                         As at         As at
                                                   December 31,  December 31,
                                                          2006          2005
                                                                    (Note 15)
    -------------------------------------------------------------------------
    Cumulative eligible capital                     $   40,643    $   31,879
    Undepreciated capital cost                         120,088        53,443
    Trust Unit issue costs                               3,561         4,547
    Deferred financing costs                               231           250
    -------------------------------------------------------------------------
    Balance at end of period                        $  164,523    $   90,119
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        The federal government has recently announced a "Tax Fairness Plan
        for Canadians". The proposed plan intends to restore balance to the
        federal tax system by creating an equal playing field for income
        trusts and corporations. For the Trust these proposed changes would
        not come into effect until 2011.

        The new proposed rules includes changes to the taxation of funds paid
        out of the Trust to unitholders. Effective January 1, 2011, the Trust
        will be required to pay tax at a rate of 31.5% on amounts distributed
        to unitholders. The net distribution paid to unitholders will then be
        taxed similar to a dividend from a Canadian public corporation.

    10. Changes in Non-cash Working Capital Balances

        a) Changes in non-cash operating working capital balances, before
           giving effect to working capital acquired are comprised of the
           following:

                                                                     101 Day
                                                    Year Ended  Period Ended
                                                   December 31,  December 31,
                                                          2006          2005
                                                                    (Note 15)
        ---------------------------------------------------------------------

            Accounts receivable                     $   (2,219)   $  (12,259)
            Inventory                                   (1,351)         (232)
            Prepaid Expenses and deposits                 (173)         (519)
            Accounts payable and accrued liabilities    (1,698)          (99)
            Income taxes payable                          (750)          750
        ---------------------------------------------------------------------
                                                    $   (6,191)   $  (12,359)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        b) Changes in non-cash investing working capital balances, before
           giving effect to working capital acquired are comprised of the
           following:

                                                                     101 Day
                                                    Year Ended  Period Ended
                                                   December 31,  December 31,
                                                          2006          2005
                                                                    (Note 15)
        ---------------------------------------------------------------------
            Accounts payable and accrued
             liabilities                            $    5,598    $     (226)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    11. Contingencies and Commitments

        The Trust is committed to future minimum payments under lease
        contracts for shop and office space, office equipment and vehicles
        with varying expiration dates. The minimum lease payments under these
        leases over the next five years and in aggregate are as follows:

                    2007                 $    4,464
                    2008                      3,449
                    2009                      2,236
                    2010                      1,940
                    2011                      1,548
                    Thereafter                    -
                 -------------------------------------
                                         $   13,637
                 -------------------------------------
                 -------------------------------------

        Included in lease commitments above is $1,245 per year from 2007 to
        2009, $1,063 for 2010 and $700 for 2011 for the rental of land and
        buildings to a company controlled by certain officers who are also
        directors and unitholders of the Trust.

        The Trust is committed to future minimum payments for equipment under
        construction of $8,925 during 2007 with varying estimated in use
        dates.

        On October 26, 2006, the Trust was notified of a claim filed by one
        of its competitors in the Court of Queen's Bench of Alberta alleging
        harm arising from the Trust's hiring and competitive practices and
        seeking damages of $250 plus costs, interest and punitive damages.
        Management's view is that this claim is without merit and the Trust
        intends to defend the action. In the opinion of management, it is
        unlikely that the liabilities, if any, arising from the legal
        proceedings and disputes will have a material adverse effect on the
        consolidated financial position of the Trust or its operations.

    12. Employee Benefits Plans

        The Trust has a registered retirement saving plan covering a
        significant number of its employees. In September 2006, the Trust
        implemented an employee unit purchase plan.

        a) Defined contribution plan
           Under the defined contribution plan, the Trust matches individual
           contributions up to 4% of the employee's compensation. Total
           expense under the defined contribution plan in 2006 was
           $217 (2005 - $32).

        b) Employee unit purchase plan
           All employees are eligible to have up to 4% of their salaries
           matched for the purchase of units of the Trust. These units are
           purchased on the open market by the plan administrator once per
           month. Total expense was $88 for the employee unit purchase plan.

    13. Financial Instruments

        Financial instruments of the Trust consist of cash and cash
        equivalents, accounts receivable, accounts payable and accrued
        liabilities, distributions payable and long term debt. As at
        December 31, 2006, there are no significant differences between the
        carrying values of these amounts and their estimated fair market
        values.

        Credit risk concentration of customers
        --------------------------------------

        A significant portion of the Trust's trade accounts receivable is
        from the oil and gas industry and, as such, the Trust is exposed to
        all the risks associated with the industry.

        The majority of the Trust's accounts receivables is due from entities
        in the oil and gas industry and are subject to normal industry credit
        risk. Concentration of credit risk is mitigated by having
        concentrations with credit worthy clients and a focus to continue to
        broaden the domestic customer base. At December 31, 2006, the
        accounts receivable from the Trust's largest customer amounted to 3%
        (2005 - 19%) of accounts receivable. Revenue from the Trust's
        largest customer accounts for 10% (2005 - 23%) of operating revenues
        in 2006.

        Interest rate risk
        ------------------

        The Trust's banking facilities have interest rates which floats with
        the prime rate, and as such, as these banking facilities are drawn,
        the Trust will be exposed to higher interest costs if the prime rate
        should increase.

    14. Related Party Transactions

        During the year ended December 31, 2006, the Trust made payments in
        the amount of $536 (2005 - $119) for the rental of land and buildings
        to a company controlled by certain officers who are also directors
        and unitholders of the Trust. At December 31, 2006 there is a payable
        for the rental of land and buildings in the amount of $31 (2005 -
        Nil). In addition, the Trust made payments of $276 (2005 - $46) for
        flight time to a company owned partially by certain officers who are
        also directors and unitholders of the Trust. These amounts are
        included in general and administrative expenses.

        These transactions were conducted in the normal course of operations,
        on commercial terms established and agreed to by the related parties,
        and therefore were recorded at the exchange amount.

    15. Comparatives

        Bonnett's Energy Services Trust commenced operations on September 22,
        2005. As such, the comparative financial statements for the year
        ended December 31, 2005 include only 101 days of operations.
    

    The Toronto Stock Exchange has neither approved nor disapproved of the
    information herein.

    %SEDAR: 00022595E




For further information:

For further information: Murray Toews, Chairman, President, and Chief
Executive Officer, or Kelvin Torgerson, Vice President Finance, and Chief
Financial Officer, at Bonnett's Energy Services Ltd., RR2, Site 33, Box 1,
Grande Prairie, Alberta, T8V 2Z9, Telephone: (780) 532-5700, Fax: (780)
532-4811, Website: www.bonnettsenergy.com

Organization Profile

BONNETT'S ENERGY SERVICES TRUST

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